Reports

The Teranet-National Bank HPI^TM has seen record growth in 2021. Canadian house prices rose 15.5% year-over-year, breaking the previous peak reached in 2016, before macroprudential measures were imposed to calm the housing market. Price growth reached an all-time high in four of the eleven cities in the index: Halifax, Hamilton, Montreal and Victoria. Although record highs were not observed in Toronto, Ottawa-Gatineau, Vancouver, Quebec City and Winnipeg, price increases in these areas were very strong on a historical basis. Calgary and Edmonton had a less spectacular 2021 on a relative basis, but still recorded their best gains since 2014. The 2021 year also ended strong in December, as the composite index experienced a seasonally adjusted monthly increase of 1.1%, a stronger increase than the 0.6% increase recorded in November. This greater increase in prices coincides with the stronger pace seen in the resale housing market. Indeed, over the past five months, sales have increased and the inventory of properties for sale has remained very low, explaining the recent acceleration in prices. Given that the inventory of properties for sale is at an all-time low, it would not be surprising to see further increases in home prices in the coming months. However, the recent increase in mortgage rates and the increase we expect in 2022 should eventually dampen this appreciation.

January 2022

Home prices rose by 0.5% in the major urban markets after seasonal adjustments in November, a stronger increase than what we observed in the two previous months. It should be noted that from June to October, price growth moderated coincidentally with a diminishing activity in the resale market. However, over the past three months, sales have increased and the inventory of properties for sale has remained very low, which explains the acceleration in prices observed in November. Given inventory at a record low, it would not be surprising to see further increases in home prices in the coming months. However, the recent rise in mortgage rates and the anticipation of more rate hikes next year should eventually put a brake on appreciations. All in all, price growth over 12 months has moderated to 15.2% for the composite index, which remains very high on a historical basis. No less than 90% of the 32 CMA’s posted increases of more than 10% over the past year, the highest proportion on record, which attests to the widespread nature of the increases in the country.

December 2021

The Teranet-National Bank HPI remained essentially stable between September and October after a small increase of 0.1% the previous month. Does this mean that housing prices have entered a dry spell in Canada? Not so fast. It is quite typical to observe a lull in September and October after the summer strength. In fact, the evolution of the last two months was essentially in line with the average of the last ten years for these months. This is still a significant moderation relative to the previous seven months, which were all substantially above their averages. For this reason, the 12-month price growth moderated but remains high at 15.8% for the composite 11. Over this period, no less than 80% of the 32 agglomerations posted increases of more than 10%, which testifies of the generalized nature of the increases in the country. Despite the deterioration in affordability over the past year and our expectation of higher mortgage interest rates going forward, we do not foresee a downward trend in prices for the next few months. This is because although the level of sales has moderated recently, it remains historically high and the inventory of properties for sale continues to be extremely low.

November 2021

It has been a few months now that sales in the Canadian residential market have been decreasing. This slowdown is beginning to have an impact on price growth, with the Teranet-National Bank HPI remaining relatively stable between August and September with a slight increase of 0.1%, the smallest monthly increase since January 2020. For its part, the 12-month price growth came down from its record high observed in August and stood at 17.3% in September. This is the first time in fourteen months that annual growth has been lower than that observed in the previous month. Although the annual price increase in September was lower than what we saw in the previous two months, it was still the third highest 12-month growth in history. In addition, prices remain up 10% or more in 87% of the 32 urban areas surveyed, even though some extremely hot markets are beginning to cool. All in all, barring a more significant rise in mortgage rates, we do not foresee a downward trend in prices in the coming months. It should be noted that the level of sales remains historically high and that the inventory of properties for sale continues to be extremely low.

October 2021

In August, the Teranet-National Bank HPI saw record 12-month growth of 18.4%. This past year has been characterized by widespread price increases in the regions covered by the index. Indeed, prices were up 10% or more in 87% of the 32 urban markets surveyed. In addition, price growth was up 30% or more in 45% of markets. However, this dizzying growth in major urban centers hides a very different dynamic when analyzing the month-over-month variations. In fact, using the unsmoothed composite HPI adjusted for seasonal effects, there have now been five consecutive months in which the monthly increase in prices has been lower than in the previous month. From July to August, prices even remained essentially unchanged (+0.1%). This stagnation coincides with a decrease in activity in the resale market, which is potentially being held back by affordability issues after the staggering price increases. Indeed, home sales have been declining month-to-month for five months now. However, we do not see prices decreasing in the short term as the level of sales remains high on a historical basis and the inventory of properties for sale remains very low.

September 2021