Canada: House prices contract at sharper pace in September
House prices decreased 3.0% month on month in September according to the Teranet-National Bank Composite House Price Index, which followed August’s 2.4% decrease.
On an annual basis, house prices rose at a softer pace of 6.0% in September (August: +8.9% yoy), the worst result since July 2020.
Other housing-related indicators for September painted a mixed picture: Month-on-month, home sales and the number of newly listed properties fell, but housing starts rose sharply.
Overall, September data suggest that the Bank of Canada’s aggressive rate hikes are still having a chilling effect on the real estate market.
Looking forward, the housing market will continue to slow as monetary policy tightens and growth weakens. This bodes poorly for residential investment—which was 8% of Canada’s GDP in 2021—and real-estate-related services activity.
Regarding the outlook for housing starts, Rishi Sondhi from TD Economics said:
“September marked a huge month for homebuilding activity, and urban starts were up 5% in the third quarter, which will support residential investment and overall economic growth […]. [However,] we doubt that this robust pace can be sustained given declining sales and rising interest rates, although some offset should come from robust population growth. All told, we see starts trending lower, but remaining at healthy levels, through 2023. ”