Canada: House prices continue their decent in November as Ontario markets shed gains
December 13, 2017
House prices continued paring this year’s gains in November. Experiencing a third consecutive monthly decline, the Teranet-National Bank National Composite House Price Index recorded a 0.5% fall in November from the previous month as prices continued retreating from the record-setting highs notched earlier this year. November’s decline, which moderated from the 1.0% fall recorded in October, was again largely the result of the worsening of conditions in Toronto and the wider Ontario market. Notably, an increase in the raw index in November suggested that buying activity in the month rose ahead of the implementation of new federally-mandated mortgage stress tests for homebuyers set to take effect in January.
November’s decline in national house prices came as Toronto—which accounts for more than a third of the 11-city composite index—experienced sharply lower prices for a third consecutive month (-1.4% month-on-month). That said, conditions in Toronto have shifted the very tight market towards a more balanced one, and circumstances remain far from dire. More broadly across Ontario, the implications of the Fair Housing Plan continued to be felt as Hamilton and Ottawa-Gatineau again experienced monthly declines. Elsewhere in Canada, house prices in Vancouver and Victoria were flat from a month earlier in November while Montreal and Halifax recorded fresh record highs in the month.
On an annual basis, national house prices rose at a slower pace in November, decelerating to 9.2% growth from 10.0% growth a month earlier. Although interest rates have risen since July, the nationwide slowdown has largely been the result of Ontario’s new rules intended to cool its provincial housing market. While it remains to be seen whether the province will experience a rebound in the near term, British Columbia’s recent experience with implementing a foreign homebuyer tax—prices in Vancouver rallied this year after briefly falling on implementation of the tax last year—does cast doubt on the likelihood of a controlled cooldown in Canada’s largest property market.
Author: Christopher Thomas, Economist