Canada: House prices continue their slide in October as Ontario markets weaken
November 15, 2017
House prices continued walking back this year’s significant gains in October. Experiencing a second consecutive month of decline, the Teranet-National Bank National Composite House Price Index recorded a near-decade low 1.0% monthly decline in October as prices retreated from the record-setting highs notched earlier this year. October’s decline, which worsened from the upset 0.8% fall recorded in September, was largely the result of a further worsening of conditions in Toronto and the wider Ontario market.
October’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 (-2.8% month-on-month). That said, the recent softening of conditions in Toronto has shifted the very tight market towards a more balanced one, and circumstances are still far from dire. More broadly across Ontario, the implications of the recent Fair Housing Plan continued to be felt as Hamilton, Ottawa-Gatineau and another 11 non-composite Ontario cities experienced monthly declines. Elsewhere in Canada, house prices recorded fresh record highs in Vancouver, Victoria and Montreal.
On an annual basis, national house prices rose at a slower pace in October, falling to 10.0% from 11.4% 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. An early sign that the provincial market had begun to stabilize, however, came in October as home sales in Toronto rose month-on-month. 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 are now rallying 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