Canada: Climb in national housing prices slows as Toronto prices drop in August
September 13, 2017
In August, the Teranet-National Bank National Composite House Price Index recorded a 0.6% increase from a month earlier, easing from July’s remarkable 2.0% monthly rise.
In a notable shift, August’s modest increase in national housing prices came despite falling prices in the Toronto market—which accounts for more than a third of the 11-city composite index. In August, Toronto recorded its first monthly decline (-0.43% month-on-month) since January 2016. Given the lagging nature of the indicator, as it tracks closed sales that often appear months after an initial agreement, Toronto’s modest drop in August was likely a reaction to the implementation of Ontario’s Fair Housing Plan months earlier that was intended to cool the market. Further suggesting that the Ontario government’s recent legislation has started to bite, modest decelerations were also recorded in Hamilton and Ottawa-Gatineau. Meanwhile, the sharpest monthly increases were recorded in British Columbia’s two largest cities, while Québec’s two largest cities each recorded slight declines.
On an annual basis, national housing prices rose at a moderately slower pace in August, edging down to 13.1% from 14.2% a month earlier—and once again reached an all-time high. Two provincial governments have so far acted this year to curb the sharp rise in housing prices in their respective markets. Although Ontario’s new rules appear to have had the short-term effect of cooling the housing market, recent gains in Vancouver suggest that these intended results could be short-lived. In British Columbia, legislation designed to curb speculation only temporarily delayed foreign homebuyers earlier this year. Recognizing the permanency of these new taxes on home buying, foreigners quickly priced-in the added costs. Despite Ontario’s latest success, British Columbia’s recent experiences cast doubt on the likelihood of a controlled cooldown in Canada’s largest property market.
Author: Christopher Thomas, Economist