Reports

The team behind the Teranet-National Bank House Price™ Index is pleased to announce that effective September 20, 2022 we will be releasing a new series of unsmoothed indices. These unsmoothed indices will be offered in addition to the current smoothed indices released on a monthly basis. Previously published indices were smoothed to represent the average changes of the raw index within the last three months.

Given the unusually rapid changes in interest rates, the unsmoothed version of our price measures will allow for earlier detection of changes in market conditions. The provision of the unsmoothed version of the Teranet-National Bank indices will also allow users to adjust the data to their specific needs.

After the monthly release on September 20, 2022 you will notice a few changes to the website. Any graphs or charts used throughout the website will now reference the unsmoothed index. The smoothed index values will still be available when you download the data file, and you will notice the addition of a new column that includes the unsmoothed index value.

If you have any questions about the new unsmoothed index, please feel free to reach out to info@housepriceindex.ca.

Declining transactions in the resale market and rising interest rates continue to weigh on property prices, with the Teranet-National Bank Composite House Price Index falling 0.2% from June to July after seasonal adjustments. This is the first monthly decline since the one seen at the beginning of the pandemic in June 2020. Using the unsmoothed seasonally adjusted index, which is more sensitive to market fluctuations, the decline is even more pronounced, with property prices falling 1.4% from June to July. Moreover, price decreases continue to be widespread across the country. In fact, for all 32 markets where the seasonally adjusted unsmoothed index was available in July, 58% experienced a decline during the month, the same proportion as observed in June, but much higher than those recorded since the beginning of the year. You have to go back to May 2020, at the very beginning of the pandemic when uncertainty was at its peak, to find such a large proportion of markets down. While the Bank of Canada has indicated that it will continue to raise its policy rate and that transactions in the real estate market should continue to decline, we anticipate that the composite index should decrease by 10% by the end of 2023.

August 2022

With the decrease in resale market transactions and the increase in interest rates, property price growth moderated for a third consecutive month, but still remained solid in June at 1.0% after adjusting for seasonal effects. Using the seasonally adjusted unsmoothed index1, which is more sensitive to market fluctuations, the moderation is even more pronounced, with property prices
essentially flat in May and June. While the Bank of Canada has indicated that it will continue to raise its policy rate and that transactions in the real estate market should continue to decline, we anticipate that the composite index should decrease by 10% by the end of 2023. The price declines have already begun to spread across the country. In fact, for all 32 markets where the seasonally adjusted unsmoothed index was available in June, 58% experienced a decline during the month, compared to 34% in May and only 16% in January. We have to go back to May 2020, at the very beginning of the pandemic when uncertainty was at its peak, to find such a large proportion of markets in decline.

July 2022

Housing affordability in Canada worsened by 4.9 points in Q1’22, marking a fifth consecutive quarterly deterioration. The first quarter of 2022 was also the worst quarterly deterioration in over 27 years. Over the last 12 months, the worsening in affordability was the nastiest  in 40 years. For the first time since 1994, it would make more than 50% of income for a representative household to service the mortgage on a representative home in Canada’s main urban centres.

Q1 2022

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