Despite the monthly increase, annual growth in the composite index fell from its peak of 18.8% in April to 18.3% in May. This deceleration comes as the housing market is experiencing a sharp slowdown due to rising interest rates and deteriorating affordability in recent months. Indeed, there is now a significant gap between the increase in property prices and the borrowing capacity of buyers. Since the beginning of the pandemic, the composite index has grown by 38.7% from February 2020 to May 2022, while borrowing capacity has declined by 5.8%, representing a 44.5% gap. With the continued normalization of monetary policy, we estimate that property prices could decline by 5% to 10% by the end of 2023 to be more in line with the financial reality of households. Even if a decrease in prices is still not observed on the Teranet-National Bank HPI, seasonally adjusted monthly growth was already less vigorous in May, falling from 2.0% in April to 1.6% during the month. Moreover, using the seasonally adjusted, unsmoothed index, which is more sensitive to market fluctuations, prices instead remained relatively stable in May with a small increase of 0.2%.

June 2022