Canada: House prices climb in January as Vancouver prices jump and Toronto prices rebound
February 14, 2018
House prices continued their ascent at the outset of the year. In January, the Teranet-National Bank National Composite House Price Index recorded a 0.3% increase from the previous month, ticking up from December’s 0.2% rise. January’s increase was the result of wide gains in Vancouver and, to a lesser extent, a minor rebound in Toronto—where prices rose for the first time in six months.
January’s uptick was the result of higher prices in only four of the 11 cities included in the composite index—the narrowest breadth of gains for a monthly increase in two years. Vancouver, where prices hit a fresh all-time high, and Victoria posted the strongest gains in the month and drove the overall expansion. Meanwhile, house prices in Toronto—which accounts for more than a third of the 11-city composite index—rose for the first time in half a year, likely as homebuyers with preapproved mortgages granted before new federally-mandated stress tests kicked in on 1 January rushed to close sales. Prices in Montreal, the only other city to record an increase in the month, also notched a new all-time high.
On an annual basis, house prices rose at a slower pace in January, decelerating to 8.7% from 8.9% a month earlier. Although it would be premature to argue house prices in Toronto are bouncing back after a foreign homebuyer tax was introduced last April, especially as mortgage rates continue climbing, January’s rebound along with Vancouver’s recent crush of gains does cast further doubt on the government’s ability to legislate a sustained cooldown of Canada’s largest property markets.
Commenting on January’s reading, Marc Pinsonneault, Senior Economist at National Bank of Canada, noted:
“Just like it did the prior month, Vancouver drove the Composite index in January. […] The fact is that Vancouver’s home resale market remained tight even after the introduction of a tax on acquisitions by foreigners. The same cannot be said of Toronto, where the market turned from tight to balanced after the introduction of a similar tax last April. Toronto’s index was nevertheless up in January for the first time in six months, [although] with further increases in mortgage rates still to come, it is premature to conclude that home prices have definitely turned the corner […] .”
Author: Christopher Thomas, Economist