Canada: House prices fall nationally for first time since January 2016 as Toronto sours
October 12, 2017
In September, retreating from the significant gains recorded earlier this year, the Teranet-National Bank National Composite House Price Index recorded the first monthly decline since January 2016 and the largest decline since September 2010. September’s decrease from a month earlier clocked in at 0.8% largely as a result of falling prices in Toronto, and contrasted August’s tepid 0.6% increase.
September’s decline in national housing prices came as Toronto—which accounts for more than a third of the 11-city composite index—experienced sharply lower prices for a second consecutive month (-2.68% month-on-month). Given the lagging nature of the indicator, as it tracks closed sales that often appear months after initial agreement, Toronto’s stark drop was almost certainly a consequence of the implementation of Ontario’s Fair Housing Plan earlier this year. Moreover, prices declined significantly in Hamilton and decelerated sharply in Ottawa-Gatineau in September, further suggesting that the Ontario government’s recent legislation has begun to cool the provincial property market—as intended. Meanwhile, higher prices were recorded across the west coast, with the strongest gains posted in Vancouver, while prices fell in the index’s two easternmost cities, Halifax and Québec City.
On an annual basis, national housing prices rose at a slower pace in September, falling to 11.4% from 13.1% a month earlier. Although Ontario’s new rules appear to have had the short-term effect of cooling the provincial housing market, British Columbia’s recent experiences—prices in Vancouver hit a fresh all-time high in September—cast doubt on the likelihood of a controlled cooldown in Canada’s largest property market. That said, the Bank of Canada began its long-awaited tightening cycle in July and higher interest rates in the months to come could play a role in sustaining any cool-off of the country’s most overheated housing markets.
Author: Christopher Thomas, Economist