News and Economic Reports

The national HPI has grown at a below-inflation rate of 0.5% over the last 12 months, the smallest gain since November 2009. Moreover, the fact that monthly gains are reported for May and June does not mean that the market recently turned the corner. These two months typically register the strongest growth rates in a year. Indeed, the two latest rises were among the weakest in history for months of May and June. If seasonally adjusted, the national HPI would been down in both months this year. However, the weakness is not regionally broad-based. The national HPI was dragged down by 12-month home price declines in Western Canada metropolitan areas (Vancouver, Calgary, Edmonton and Winnipeg) and a tiny increase in Victoria. In Central Canada and in the East, home price growth ranges from decent to strong. This is consistent with the state of home resale markets. For example, the Vancouver market turned favorable to buyers at the end of last year, while the Toronto market remained balanced and Montreal’s market has never been this tight since 2005. That being said, a rebound in home sales recently occurred in Canada which was also felt in the largest Western metropolitan areas. This should help limit home-price deflation in these areas.

July 2019

Affordability improved in Q1 by the most since 2014 as measured by the urban composite index as eight of the ten urban markets progressed in the quarter (left chart). The healthy labour market was the largest contributor to this development via a significant increase in income (+1.0%) that outpaced the increase in home prices (+0.3%) – left chart. Coincidentally, mortgage rates were not a drag on affordability for the first time in 7 quarters. Vancouver experienced the largest improvement in affordability among urban markets in Q1 but that was mostly due to declining home prices. We continue to expect price weakness in this market as resale conditions remain favourable to buyers in both the condo and non-condo segments so far in Q2. In Toronto, the composite is showing a slight improvement but this is solely due to the non-condo segment. Indeed, condo market affordability deteriorated further with prices jumping 2.0% in Q1 as the imbalance between supply and demand favoured sellers. Looking ahead, there is hope for further improvement in affordability in Canada in Q2 given the recent drop in mortgage rates.

Read research report

One should not rejoice about the first rise in home prices in seven months as May is
historically the second strongest month of the year. In effect, the 0.5% increase
represents the weakest performance on record for a month of May. As a result, the
annual increase moderated to 0.7%, the lowest since the recession (see left chart). While
a combination of stress testing measures, foreign buyer’s taxes and earlier increases in
mortgage rates have contributed to the slowdown, recent data shows that the Canadian
housing market is stabilizing. Home sales increased for a third month in a row in May,
rebounding close to their past ten year average, a development which was made possible
thanks to a booming labour market and a plunge in mortgage rates. In Toronto, both
condos and other dwellings prices showed pullbacks in May but resale market conditions
(see right chart) are not suggestive of a significant deterioration in the coming months
especially since the GTA created a whopping 92K jobs so far this year. The Vancouver
market showed the weakest performance on an annual basis among covered markets (-
4.1%, y/y) but its job market is also firing on all cylinders in 2019 a development that
could have contributed to the strong rebound in resales observed in May (+24%).

June 2019

While the Composite Teranet-National Bank HPI dropped again in April, there are signs of stabilization. April’s decline in the Composite index is the smallest in months. The cumulative decline over this seven-month stretch is only 1.8%, a moderate loss compared to the 2008-2009 recession, and even compared to shorter sequences of drops that occurred since then (left chart). The moderation of the recent price decline at the national level is partly due to Toronto, where the index edged down only 0.2% over that seven-month period. The resilience of the home resale market in the largest urban area in Canada is due to the performance of the condo segment, where the index was up 2.1% over the period (right chart). Judging from the active-listings-to-sales ratio, market conditions on the condo market have been tight over the last three years, suggesting that the upward trend in condo prices in Toronto is unlikely to be interrupted in the near future.

May 2019

In March, the downward trend in home prices continued with the Composite Teranet-National Bank HPI slipping for a sixth month in a row, a first in six years. Moreover, in 20 years of history, this is the first time that the Composite HPI drops in a month of March outside a recession. A few months ago, the home price weakness was mainly noticeable in the westernmost metropolitan areas. Judging from the six-month change in the index, it now extends to nine of the 11 regions comprising the Composite index, the exceptions being Montreal and Halifax. If we also consider 14 other metropolitan regions for which a Teranet-National Bank HPI is computed (although not included in the Composite), we have a price increase in only six of the 25 metropolitan regions considered. This is one of the lowest diffusion of 6-month price gains in March over the history of the index. Home prices are adjusting to the recent rise in interest rates and stricter mortgage qualification rules. But price weakness does not mean collapse. In Toronto, Canada’s largest real estate market, apartment prices have been up for 17 consecutive months, while prices of other types of dwellings declined only 1.4% over the last 6 months. In Vancouver, the most expensive market, employment growing 2.9% in Q1 on a y/y basis should limit further home price declines.

April 2019

In February, the downward trend in home prices continued with the Composite Teranet-National Bank HPI slipping for a fifth month in a row (left chart). Moreover, the weakness extended to most regions. In the 11 metropolitan areas comprised in the Composite Index, only one (Montreal) experienced an increase of the index over the last six months. Among the 14 other metropolitan areas for which we have a HPI, only London and Windsor did so. This was the lowest diffusion of six-month gains in ten years for a month of February (right chart). Home prices are adjusting to the recent rise in interest rates and stricter mortgage qualification rules. But price weakness does not mean collapse. In Toronto, Canada’s most important real estate market, apartment prices have been up for 16 consecutive months, while prices of other types of dwellings declined only 1.2% over the last 6 months. In Vancouver, where employment was up 3.1% on a y/y basis in February, seasonally adjusted home sales stabilized in the beginning of the year, limiting the potential of further home price declines.

March 2019

In Q4, affordability worsened for a 14th consecutive quarter as measured by the urban
composite index. All but two markets experienced a deterioration stemming from a 20-
basis points increase for residential mortgage rates, hitting harder the priciest markets in
the country (see table on page 12 for more details). Financing costs were up for a sixth
consecutive quarter which marked the longest streak of rises since the period of ’99-‘00.
In Vancouver, home prices are decreasing but it did not prevent affordability to
deteriorate further amid higher interest rates and declining median annual income. In this
city, our measure for the non-condo segment have crossed the psychological threshold
of 100% as it would now require 101.5% of pre-tax median household income to pay for a
representative home. In other words, this segment is even more out of reach for a median
income family. As it is the case in Vancouver, both segments at the national level
experienced a significant deterioration over the past 3 years but the magnitude of the
worsening has been less pronounced for condos (left chart) which could explain why
prices are still running at a solid pace in 2018 (+6.2% y/y vs. 1.2% for non-condos). That
being said, a moderation in the condo segment should not be ruled out in 2019 as stiff
competition is now coming from the rental apartment option.

Read research report..

Home prices weakened in the second half of 2018 in most of the metropolitan areas
constituents of the Teranet-National Bank Composite HPI. The Calgary index did not rise
for a sixth month in a row in December. It was a fifth month in a row for Vancouver, and
a fourth one for Edmonton. Weakness became apparent in Q4 for six other metropolitan
areas, when only Montreal and Ottawa-Gatineau experienced home price growth (left
chart). This is the worst 3-month diffusion for December in five years. This conclusion
still holds If we also include in the sample 14 other Canadian metropolitan areas for
which a Teranet-National Bank HPI is available (although not integrated in the national
composite index) – right chart. Higher mortgage rates and tougher qualification rules are
causing the cooling in most major home resale markets in Canada. The recent increase
in vacant new dwellings may also add to downward price pressure in some markets. At
this juncture, we continue to expect a soft landing of the Canadian home resale market.

.January 2019

The Composite 6, which was first launched in December 2008 was initially built to capture the aggregate performance of the Canadian housing market with the richest available data at that time. In 2011, we expanded the Composite 6 by five new cities and reviewed and refined the geographic territory of each city to better align with the Census Metropolitan Area definitions provided by Statistics Canada. The Composite 11 was built with this information in hand and more precisely reflects the rate of change of single-family home prices in Canada.

As a result, the last public report that will contain the Composite 6 index (C6) data will be March 13^th, 2019.  After this date, only Composite 11 will be made available in the public sphere. If you still require the Composite 6 data, it will be available as a commercial offering. You can contact us to discuss options to continue receiving the data. If you have any questions or concerns, please reach out to us at info@housepriceindex.ca