Reports

After returning to growth territory in February, the Teranet-National Bank Composite Index™ continued to rise in March, with a small gain of 0.2% on the previous month. This increase in home prices comes at a time when the housing market has regained strength since November, buoyed in particular by exceptional demographic growth, slightly more advantageous fixed mortgage interest rates and the anticipation of policy rate cuts by the Bank of Canada. Although these factors will continue to support the real estate market in the months ahead, we are cautiously optimistic about a significant recovery in the housing market in the coming months and stronger price growth. Indeed, many uncertainties remain, including a potential further deterioration in the labour market for young people, who are facing the worst affordability conditions in decades.

April 2024

After contracting by 1.5% over the previous five months, the Teranet-National Bank Composite Index^TM finally returned to growth in February, rising by 0.2% compared with the previous month. This increase in property prices comes at a time when the housing market regained strength between November and January, buoyed by exceptional demographic growth, more advantageous fixed mortgage interest rates and the anticipation of interest rate cuts by the Bank of Canada. However, it remains to be seen whether this is the start of an upward trend. On the one hand, the lack of housing supply on the market will continue to support prices, but the persistent affordability challenges should limit households’ ability to pay and thus the increase in property values. It appears that the resale market started to slip again in February, while bond yields have risen in recent weeks due to less favourable news on inflation, which is delaying potential cuts in the overnight rate. As a result, we expect home prices to move sideways in the short term.

March 2024

The Teranet-National Bank Composite Index^™ continued its correction for a fourth consecutive month in January, with prices down 0.3% on a seasonally adjusted basis compared with December. It should be noted, however, that the drop in the composite index in January was due solely to lower prices in two major cities where affordability remains a major issue, namely Vancouver and Toronto. As a result, house prices across the country are now 3.7% below their April 2022 peak. However, renewed activity in the resale market raises the question of whether this weakness will persist. This rebound in transactions is taking place against a backdrop of strong demand due to exceptional demographic growth and the reduction in mortgage interest rates since October. Moreover, in a context where the lack of housing supply remains problematic, the end of Bank of Canada rate hikes and potential rate cuts have reduced uncertainty and offered a window of opportunity to some buyers. It remains to be seen whether this upturn will be long-lasting, given that we expect the labour market to experience further difficulties later this year.

February 2024

The Teranet-National Bank Composite Index™ continued its correction for a third consecutive month in December, with prices down 0.5% compared to November in a context where the number of transactions on the resale market continues to be weak, despite a rebound during the month. Indeed, persistent affordability issues (despite the recent drop in fixed mortgage rates), combined with a less buoyant job market, have contributed to the decline in property prices. Despite a less vigorous economy, we are not yet witnessing a wave of additional supply on the real estate market. In fact, active listings declined in December, and the number of months of inventory fell from 4.2 in November to 3.8 during the month, helping to limit the fall in prices. For the months ahead, prices should continue to decline despite the support of historical population growth and the shortage of housing supply, as the deterioration in the labour market is set to continue. We expect the composite index to return close to its early 2023 low by late spring, with a cumulative decline of around 8% from its April 2022 peak. For their part, the interest rate cuts expected to begin in Q2 should set the stage for market stabilization in the second half of the year.

January 2024

The Teranet-National Bank Composite Index^™ continued its correction for a second consecutive month in November, with prices down 0.5% compared to October in a context where the resale market continues to lose momentum. Indeed, persistent affordability issues (despite the recent drop in long-term fixed mortgage rates), combined with a less buoyant job market, have contributed to the slowdown in the real estate market. This less favourable economic backdrop has certainly undermined consumer confidence, with consumers more pessimistic about the real estate market than at any time in the past 20 years. Indeed, the net proportion of consumers believing that now is a good time to make a major purchase (such as a property or car) is even lower than at the worst of the pandemic. Over the coming months, prices will continue to fall, despite the support of historical demographic growth and the shortage of housing supply. We expect the composite index to reach its trough set at the beginning of the year again by spring 2024, with a cumulative decline of 8% from its April 2022 peak. However, if the moderation in the job market remains limited and overnight rate cuts actually take place in early 2024, the coming spring could represent a good window of opportunity for some buyers and help stabilize prices.

December 2023