News and Press Releases

There are two signs that data from land registries reflect the slowdown in home sales activity that started in the second half of March. The first is the 22% y/y decline in the number of sales pairs from which May indexes were derived. This was the largest y/y decline since April 2013 and a clear break in the upward trend that was taking place earlier. There were declines in sales pairs in all the 11 metropolitan areas. The second sign is the slowdown in the seasonally adjusted raw Composite index, which rose only 0.2% in May after three months of gains topping 0.8%. The raw index declined or was unchanged in five of the eleven constituent metropolitan areas. In our view, declines in home prices lie ahead. The Canadian unemployment rate went from 5.6% in February to 13.7% in May, and is expected to remain elevated at least up to the end of next year. In this context, demand for housing may decrease due to a reduction in immigration and would-be first-time homebuyers not being able to qualify for a mortgage loan. At the opposite, supply may be fuelled by homeowners unable to meet mortgage payments and for that reason will look to sell their home.

June 2020

Based on home sales reported in land registries, resale prices rose at the fastest rate for a month of April since 2010. Moreover, if we consider the 11 metropolitan areas included in the Composite index and 14 other metropolitan areas for which a HPI is available, the index increased in 22 of these 25 regions, the highest diffusion of monthly gains in nine months. Of course, given that the Canadian economy entered into a recession following sanitary measures taken in order to prevent the spread of COVID-19, it is not likely that this momentum will persist. The Canadian unemployment rate went from 5.6% in February to 13% in April, and is expected to remain elevated at least up to the end of next year. In this context, demand for housing may decrease due to a reduction in immigration and would-be first-time homebuyers not being able to qualify for a mortgage loan. At the opposite, supply may be fueled by homeowners unable to meet mortgage payments and for that reason will look to sell their home. In other words, a lasting high unemployment rate could mean downward pressure on house prices.

May 2020

At the national level, resale home prices were still gaining momentum in March. But this is based on home sales reported in land registries. Home sales reported by real estate boards are timelier, being recorded soon after the sale becomes unconditional. The most important real estate boards all mentioned a clear break of activity during the second half of March due to measures to contain propagation of COVID-19. This was confirmed when CREA reported a monthly drop in home sales from February to March in 25 of the 26 major Canadian markets, with sharp declines in most of the markets covered by the Teranet-National Bank HPI. This cooling of activity should soon be reflected on the house price indexes. We expect the loss of momentum to be more prevalent in the metropolitan markets located in Central and Eastern Canada (Toronto, Hamilton, Ottawa-Gatineau, Montreal and Halifax) which so far have pulled the national HPI up.

April 2020

At the national level, resale home prices were gaining momentum in February. The 0.4% monthly gain in the Composite index was double the average of the previous ten years for a month of February. In particular, after 12 consecutive monthly declines, Vancouver HPI rose in each of the last five months, reflecting the fact that Vancouver resale market recently returned to balance. Sure, we still saw weakness in other regions, such as the Prairie Provinces (Alberta, Manitoba and Saskatchewan) where markets were still favorable to buyers. But CREA just reported a rather generalized increase in home sales in February, including for Calgary and Edmonton. Unfortunately, then came the outbreak of Covid-19 and its impact on oil prices and disruptions in the supply chain. The unprecedented sanitary measures imposed by the authorities to tackle the pandemic will severely impact business activity and jobs over the coming months. In that situation, the home resale market should be heavily curtailed for the coming months.

March 2020

Canada’s resale home prices continued to rise in January. The HPI of five of the six markets located in Central Canada or in the East (Montreal, Toronto, Hamilton, Ottawa-Gatineau and Halifax) performed well over the last year, the exception being Quebec City. At the opposite, the five righthand charts show negative (Vancouver, Calgary Edmonton) or barely positive (Winnipeg, Victoria) y/y HPI growth. The sub-index for Central and Eastern Canada grew 5.2% over the last 12 months, against a 2.5% fall for the Western sub-index. This is consistent with the various conditions prevailing on the regional markets in Canada. Based on the active-listings-to-sales ratio published by CREA, home resale markets in the Prairie Provinces (Manitoba, Saskatchewan and Alberta) are buyers’ markets, while markets in Ontario, Quebec and the Maritimes Provinces (Nova Scotia, New Brunswick and Prince Edward Island) are sellers’ markets. Recently, the Vancouver market went from favorable to buyers to balanced. The behaviour of Vancouver Teranet-National Bank HPI, which rose over the last four months, is consistent with this improvement in market conditions.

February 2020

The last two monthly gains in the national HPI might seem moderate, but they are in fact larger than usual for this time of the year when resale activity is typically low. For instance, the 0.2% increase in December compares to an average of 0.1% for this month over the last 11 years. Indeed, after seasonal adjustment, the national HPI ended the year with a 5-month string of gains, including a strong 0.7% rise in December. This is quite a turnaround from the weakness experienced in the first half of 2019. Indexes for Toronto, Hamilton and more recently Vancouver, Victoria and Quebec City contributed to this trend reversal, while indexes for Ottawa-Gatineau, Montreal and Halifax performed well throughout the year. Only the indexes of the largest metropolitan areas in the Prairies, namely Calgary, Edmonton and Winnipeg remained lethargic over the second half of the year. This is consistent with end-of-year CREA
data showing that the home resale market in the Prairie Provinces is still favorable to buyers. At the opposite, markets are favorable to sellers in Ontario, Quebec and the Maritime Provinces, and balanced in B.C. For 2020, expect home prices to accelerate in all these regions except the Prairies.

January 2020

The national HPI increase in November is atypical at this time of the year, as it dropped seven times in that month over the last ten years. Furthermore, the two index monthly drops among the 11 metropolitan areas comprised in the national HPI constitute the lowest diffusion of declines in November over the last decade. If we add 14 other metropolitan areas not comprised in the national index, we have seven index drops last month, which is also the lowest diffusion of declines for a month of November over the decade. Consistent with the recovery of home sales, the two consecutive gains in Vancouver’s index contributed to strengthen the national HPI. Meanwhile, Toronto’s index stagnated over the last two months as home sales plateaued. But this is not worrisome, as the market remains balanced. Montreal’s index displayed the most sustained performance, with 17 rises over the last 20 months, but it is second to Ottawa when it comes to cumulative growth over the period (15.4% for Ottawa against 11.0%
for Montreal).

December 2019

The fact that the national HPI began the fourth quarter with a dip is not troublesome. The fourth quarter is typically a lethargic period for the index. Indeed, last month’s decline was smaller than the average of the last ten Octobers. We do not think that October heralds a downward trend on the national home resale market. We rather welcome the first monthly rise of Vancouver’s index in 15 months. This is consistent with the strong revival of Vancouver home sales since August. On the other hand, October ended a run of six monthly rises in Toronto and Hamilton. Same story for the five-months runs of Montreal and Winnipeg. But there are no reasons to believe that October’s drops in these metropolitan areas are the start of a trend. Judging from the most recent data, the resale market remains balanced in Toronto and Winnipeg, and favorable to sellers in Montreal and Hamilton.

November 2019

The fact that the national HPI has grown each month from May to September is not surprising. Almost all of the increase of a HPI during a year typically takes place over these months where the activity on the home resale market is the most intense. The underlying trend is better revealed when the HPI is seasonally adjusted. After that adjustment, the national HPI showed a downward trend from February to July, but the trend turned upward in August and September (left chart). That being said, this situation was not homogeneous among all the component regions. Seasonally adjusted or not, home prices continue to decline in Vancouver. But home sales in Vancouver have recovered strongly since their March trough (right chart). Over the period, conditions on the home resale market turned from “favorable to buyers” to “balanced”. This suggests that home price deflation should fade over the next few months in Vancouver.

October 2019

Every month we publish data around the activity of the national composite index, and some highlights from Canada’s major housing markets. Our data goes a level deeper, and can highlight the house price activity of neighbourhoods down to the postal code. The new monthly Neighbourhood Spotlight features will focus on this data and highlight Canadian neighbourhoods with particularly high or low index values.

It’s no surprise that one of Toronto’s neighbourhoods is experiencing high index values, as home prices in the city have continued to increase year-over-year. The index covering Downtown Toronto West recently printed an all time high of 328.51. In fact, this was the highest index value in all of Canada in the second quarter of 2019. This neighbourhood includes Dovercourt Village, Little Portugal, Brockton and Roncesvalles, or the FSAs of M6G, M6H, M6J, M6K AND M6R. This neighbourhood has seen an index increase of 8.3% in the past year, 50.9% in the past three years, and 84.6% in the past five years.

In a recent study about the average prices of condos and homes in Toronto neighbourhoods, Zoocasa reported that Roncesvalles, also known as Toronto’s Little Poland, has been a good neighbourhood to invest in as condo prices here have increased 71% over the past five years. The average price of a condo in Roncesvalles is now around $650,000 which still makes it more affordable compared to other Toronto neighbourhoods. Roncesvalles is home to lots of restaurants, with close access to the Entertainment District and Financial District downtown, which could explain why the neighbourhood has become more popular and experienced a significant increase in the price of condos.

To learn more about how you can gain greater insights through our neighhourhood sub-indices contact Michael Pertsis at michael.pertsis@bnc.ca or Kan Zhu kan.zhu@teranet.ca today.