News and Press Releases

OPINION: Without Vancouver, the Composite Index would have declined in March and in 5 of the 6 preceding months (top chart). Speaking of Vancouver, inferring from Real Estate Board of Greater Vancouver data, seasonally adjusted home sales have declined markedly over the last two months and the listings-to-sales ratio, while still in the sellers’ market territory, moved close to the balanced market boundary (middle chart). This should translate into moderate increases in Vancouver’s Index over the next few months. Apart from Vancouver and Victoria, March indices were below their recent peak in all regions, but the decline was the most obvious in Toronto (-7.3% since last July). This drop was likely triggered by Ontario’s implementation of the 15% Non-
Resident Speculation Tax followed by stricter rules for qualification for a mortgage (B20) and a rise in mortgage rates. As a result, Toronto monthly seasonally adjusted home sales, which had averaged more than 9,000 units over the previous 24 months, fell to less than 7,000 units on average since last May (bottom chart). Following this change in home sales pace, Toronto home resale market turned from very tight to balanced. With the two most important Canadian markets now in balanced territory or nearing it, a soft landing is the most likely outcome for the Canadian residential market.

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Mar 2018_EN

OPINION: The Composite Index relapsed in February, having lost ground in four of the last six months, for a cumulative drop of 1.9%. Moreover, over that period, indices declined in seven metropolitan regions out of 10. Excluding Vancouver, the Composite Index would have declined or stayed put in each of the last six months. Speaking of Vancouver, we estimate that home sales declined markedly in February. Therefore home price pressures may fade out in that area over the next few months, even if for the moment the home resale market remains tight. For Toronto, home sales declined in January and February after a rush in Q4. In February, we estimate that sales were at their lowest seasonally adjusted level since July 2010, with the active-listings-to-sales ratio indicating a 3- month supply, the highest since November 2012 and comfortably in the balanced territory. It therefore seems that the new stricter bylaws on qualification for uninsured mortgages together with increased interest rates are taking a bite at least in the two most unaffordable large markets in Canada.

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Feb 2018 TNB Monthly Commentary

OPINION: Without Vancouver, the Composite index would have declined for a fourth month in a row (top chart). The strength of Vancouver’s index is consistent with continued tight home resale market conditions. Toronto’s index declined for a fifth consecutive month, but the unsmoothed index (see note on methodology on next page) rose for a second month in a row (middle chart). Unless the unsmoothed index relapses in January, the sequence of declines in the smoothed index should then be interrupted. However this improvement is likely to prove temporary, as it might have resulted from buyers rushing to avoid the new bylaws on qualification for an uninsured mortgage (implemented in January 2018). This view is supported by the increase in Toronto home sales in November and December compared to previous months (bottom chart). Therefore, a resumption of the downward price trend early this year cannot be excluded.

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201712 TNB monthly commentary

FACTS: The Teranet–National Bank Composite National
House Price IndexTM dropped 0.5% in November, a third monthly
decline in a row. The index fell in four of the 11 constituents
cities: Toronto (-1.4% – a fourth consecutive decline in the
largest real estate market in Canada), Hamilton (-1.6%),
Ottawa-Gatineau (-0.8%) and Edmonton (-0.7%). The indexes
were stable in Vancouver and Victoria. They rose in Montreal
(+1.0%), Quebec City (+0.9%), Halifax (+0.8%), Calgary (+0.7%)
and Winnipeg (+0.5%). On a y/y basis, the Composite index
rose 9.2%, a fourth softer reading in a row following the
record gains of 14.2% in both June and July, and the lowest
since June 2016. November’s y/y rise was led by Victoria
(+14.0%), Vancouver (+13.5%), Hamilton (+12.3%) and Toronto
(+10.6%). The 12-month advance was much smaller in
Montreal (+6.7%), Ottawa-Gatineau (+4.9%), Halifax (+2.1%),
Calgary (+1.8%), Quebec City (+1.0%) and Edmonton (+0.2%).
See charts on next page.

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Nov 2017 TNB Commentary

OPINION: The recent loosening of the Toronto home resale market translated into Toronto’s HPI dropping in August. In fact, Toronto’s unsmoothed index (see note on methodology next page), which had already dropped in July, fell 4.2% in August (top chart). That being said, Toronto active-listings-to-sales ratio, an indicator of market conditions, turned from being very tight early in the year to indicating a balanced market in August (at 2.5, its value was in line with its long-term average – middle chart). This should limit the potential for further price correction in the Queen City. Yet more price declines cannot be ruled out given the expected tightening of qualification rules for uninsured mortgages and interest rate increases. These factors are expected to have the most impact on prices in markets where homes are the most expensive (Toronto and Vancouver). We expect home prices to be more resilient in other markets, such as Montreal which has been hot this summer (bottom chart).

OPINION: The recent loosening of the Toronto home resale market was clearly felt on Toronto’s (unsmoothed) subindex for dwellings other than condos, which declined 1.6% from June. Moreover, after seasonal adjustment, this subindex declined 2.2% (see middle table). Based on a survey of real estate boards that we conducted earlier this month, home sales declined on a y/y basis in July in most large Canadian cities west of Ottawa. If that trend persists, home price growth might decelerate in these regions. That being said, home resale markets are rather hot this summer in Montreal (bottom chart) and Ottawa-Gatineau, two areas where the Teranet-National Bank Home Price Index was at a record level in July. Home resale markets have also improved markedly of late in the Maritime Provinces. So, pressure on home price growth that might result from rising interest rates and regulation changes are likely to not affect regional markets evenly. Downward pressure is likely to be more acute in regions where affordability has been eroded by past price escalation, while home prices should be more resilient in regions where homes are more affordable.

Q2 2017: The least affordable market in 9 years

The worsening of affordability in Q2 was the eighth in a row, the longest run in almost 3 decades. As a result, our national composite is the least affordable since 2008 (top chart). Canadian households have been able to fall back for some time on the condo market which was more affordable on an historical basis. However, the deterioration in Q2 was more acute in this segment compared to other dwellings. As a result, even the condo market is now the least affordable in years (worst since 2011). Yet again this quarter, there is still a significant divergence across regions with no less than 6 markets showing an improvement of the situation in contrast with British Columbia and GTA cities that experienced further deteriorations (middle chart). The deterioration of affordability in Canada over the past two years appears to be negatively impacting consumer confidence. The latter is shown by the index related to “whether it’s a good time to make a major outlay such as a house” diverging substantially from the index grouping other questions of the survey (bottom chart). We note that despite labour markets being essentially at full-employment in Ontario and British Columbia, the percentage of respondents considering it a good time to make such an outlay is barely above Alberta’s level which is still coping with the pinch of the oil shock. The mortgage rate hike observed so far in the third quarter will certainly not alleviate this sentiment going forward.

As part of the ongoing evolution of the Teranet-National Bank House Price Index, the Composite 6 index (C6) will no longer be available for public download. The Composite 11 index (C11), which contains the same markets from the C6, as well as the additional markets of Victoria, Edmonton, Winnipeg, Hamilton and Quebec City continues to be publicly available for download. If you still wish to receive the C6 composite data, please contact us at info@housepriceindex.ca.

Montréal, June 13, 2017 – Teranet and National Bank are pleased to announce the expansion of the Teranet – National Bank House Price Index^TM (“HPI”) by fifteen additional census metropolitan areas (CMA’s) in British Columbia, Ontario, and Newfoundland and Labrador. The new CMA indices will provide greater and more granular insights into house price changes across Canada.

Canadian home prices rose to another record high in July but moderating gains provided more evidence that the real estate market is cooling, according to a national benchmark index.