Canada: House prices reverse three-month decline in December on strong Vancouver gains
January 12, 2018
House prices halted their retreat in December, interrupting a three-month period of declines. In December, the Teranet-National Bank National Composite House Price Index recorded a 0.2% increase from the previous month, contrasting November’s 0.5% decline—but still a far cry from some of the record-setting growth metrics notched earlier this year. December’s marginal increase was the result of wide gains in Vancouver more than offsetting a fifth month of losses in Toronto. That said, an increase in the raw index for Toronto was likely attributable to buying activity ahead of the implementation of new federally-mandated mortgage stress tests for homebuyers set to take effect in January.
December’s uptick in house prices was mainly the result of prices in Vancouver hitting a new record-high. These sharp gains contrasted prices in Toronto—which accounts for more than a third of the 11-city composite index—as they posted a fifth monthly decline (-0.3% month-on-month). Elsewhere in Canada, only five of the 11 cities included in the composite index recorded increases, with Winnipeg and Halifax joining Vancouver in notching new record-highs. In Ontario, a number of markets—excluding Ottawa-Gatineau—were down for another month as the impact of the Fair Housing Plan continued to be felt across the province.
On an annual basis, house prices rose at a slower pace in December, decelerating to 9.1% growth from 9.2% a month earlier. Although interest rates have risen since July, the nationwide slowdown in recent months 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—and Vancouver’s fresh record-high in December, in particular—does cast doubt on the likelihood of a controlled cooldown in Canada’s largest property market.
Author: Christopher Thomas, Economist