Canada: House prices fall for third consecutive month in August
House prices decreased 2.4% in August according to the Teranet-National Bank Composite House Price Index, which followed July’s 1.6% decrease. July’s reading came after nearly two years of generally consistent increases in prices.
On an annual basis, house prices rose at a more moderate pace of 8.9% in August (July: +11.6% yoy), the worst result since September 2020. Other housing-related indictors deteriorated in the month: Home sales, the number of newly listed properties and housing starts also fell in August, reflecting that the Bank of Canada’s aggressive rate hikes are having a chilling effect on the real estate market.
Looking forward, the housing market will continue to lose momentum as monetary policy tightens and growth slows. 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:
“Looking past the near-term, we think starts will trend lower towards the end of this year and in 2023. This reflects rising interest rates (which have boosted financing costs) and declining demand which should begin to seep into supply. That said falling, but still elevated home prices coupled with low levels of unsold new inventories should keep the pace of starts above 200k units, representing a fairly solid pace.”