News and Economic Reports

After experiencing modest increases since the start of 2024, house prices in Canada’s major urban centers remained stable in June, while market conditions for the housing market continue to indicate balanced conditions between buyers and sellers. It’s true that the beginning of the monetary easing cycle in June encouraged more buyers to take action during the month, but we didn’t see a major wave of new transactions that could have put upward pressure on prices. While record population growth, a shortage of housing supply and upcoming rate cuts by the Bank of Canada will continue to support the Canadian real estate market in the months ahead, we are cautiously optimistic about the magnitude of any recovery in the housing market in the coming months, and its potential impact on prices. Indeed, many uncertainties remain, including the risk of a further deterioration in the labour market, particularly among young people who are facing the worst affordability conditions in decades. It’s true that consumer confidence has been somewhat reinvigorated by the start of overnight rate cuts, but interest rates remain in highly restrictive territory for the time being.

July 2024

After remaining relatively stable since the start of 2024, house prices in Canada’s major urban centers rose by 0.5% from April to May, against a backdrop of renewed optimism following the start of the monetary easing cycle by the Bank of Canada. The increase observed in May was entirely due to a rise in prices in the non-condo segment (+0.7%), while condo prices have remained relatively stable since August 2023 as inventory in this segment continues to accumulate. While record population growth, the shortage of housing supply and the start of rate cuts by the Bank of Canada will continue to support the Canadian real estate market in the months ahead, we are cautiously optimistic about the magnitude of any recovery in the housing market in the months ahead and its potential impact on prices. Indeed, many uncertainties remain, including the risk of a further deterioration in the labour market, particularly among young people who are facing the worst affordability conditions in decades.

June 2024

Following growth in the previous two months in the wake of a slight upturn in the real estate market activity at the start of winter, house prices in Canada’s major urban centres remained unchanged on a seasonally adjusted basis from March to April. This stabilization comes as resale market activity remains sluggish in the spring, with first-time homebuyers possibly on the sidelines awaiting possible interest rate cuts from the Bank of Canada by summer. Weakness is particularly noticeable in the country’s largest city, Toronto, where the job market has deteriorated significantly in recent months (unemployment rate now 7.9% vs. 5.6% a year earlier). Although record demographic growth, a shortage of housing supply, more favourable fixed mortgage rates than last year and possible cuts in the policy rate will continue to support the Canadian real estate market in the months ahead, we are cautiously optimistic about the extent of an eventual recovery in the housing market in the months ahead and its potential impact on prices. Indeed, many uncertainties remain, including the risk of a further deterioration in the labour market, particularly among young people who are facing the worst affordability conditions in decades.

May 2024

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

To provide a national index that is even more consistent with activity in Canada’s real estate market, we will be adjusting our calculation methodology.

Currently, the National Composite index is calculated as a weighted average of price index levels of the eleven Census Metropolitan Area’s (“CMA”) comprising it. The weights are based on the aggregate dollar value of dwellings retrieved from the 2006 Statistics Canada Census.

Effective December 19, 2023 the following methodological changes will be in place:

• The weights will be updated periodically to reflect changes in the aggregate dollar value of dwellings in Statistics Canada’s census. Index history from February 1999 will be divided into six reference periods corresponding to census years. Each reference period will have its own set of weights for the composite index calculation based on the most recent census data available during the period.
• Weights will be applied to the monthly variation in the index rather than the index level.
• Historical C11 index values will be recalculated to reflect this methodological change.

Why are we making these updates?

We want to emphasize that these methodological changes are not dramatic nor will they change the story of Canadian single-family home prices over the past 25 years. The difference in C11 between the current and new methodological approaches is minimal. We believe that the new methodology for calculating the composite index offers several advantages:

• The country is experiencing divergent demographic growth across regions which means that the Canadian real estate market is constantly evolving. Rather than keeping the weights constant, a rebalancing of the weights of the different CMA’s included in the composite index will be carried out periodically using the latest census data. This ensures that the index is more representative of the Canadian real estate market and its variability over time.
• The updated methodology is similar to that of the S&P CoreLogic Case-Schiller Index in the United States, facilitating comparison between the two markets.

The Teranet and National Bank teams are here to support you and answer any questions you may have ahead of these changes. If you have any questions or concerns, please contact your account manager.