Canada: National house prices hit fresh record high in May as Ontario markets surge
June 14, 2017
The Teranet-National Bank National Composite House Price Index recorded a monthly increase of 2.2% in May, which came in above April’s 1.2% rise and was the fastest acceleration in nearly a year. Once again, the index continued its streak of record-breaking highs—May’s reading of 210.9 was the highest on record.
May’s increase in housing prices was broad-based, with prices climbing from coast to coast. With regard to regional developments, the Toronto housing market—which accounts for more than a third of the 11-city composite index—did much of the heavy lifting in May, recording a sizeable 3.6% month-on-month increase. Toronto was closely followed in gains by neighboring Hamilton (+3.1% mom). Meanwhile, the Vancouver market, which accounts for a fifth of the index, posted a 1.5% increase over the previous month as prices inched above their September 2016 high. May’s index reading also saw both coasts fare well, with Halifax, Québec and Montréal posting solid gains on the east coast while large gains in Victoria further buoyed prices on the west coast. On the other hand, Alberta’s Calgary and Edmonton markets experienced the most modest gains of the 11-city index in May.
On an annual basis, national housing prices accelerated at a faster rate in May, inching up to 13.9% from 13.4% a month earlier—reaching an over ten-year high. Hefty gains in Toronto and Hamilton further fueled fears of a worsening housing market bubble in Ontario. Home prices in the Toronto market have so far climbed 28.5% from a year earlier and have priced many homebuyers out of the city and into the surrounding areas. Not included in the 11-city composite index are the seven satellite cities surrounding Toronto—the region known as the Golden Horseshoe—which have all recorded double-digit gains in the past year, largely justifying the Ontario government’s recent moves to curb foreign homebuyers in an effort to cool the wider provincial market.
Measures set by the Ontario government in April followed British Columbia’s move last year to tax home purchases made by non-Canadians. Although the effectiveness of the measures has not yet been felt in Toronto—predictably because foreign investment in Ontario’s largest city is considered less of a factor than in British Columbia’s—recent gains in the Vancouver market suggest that legislation designed to curb speculation has only temporarily delayed foreign homebuyers as they increasingly recognize the new rules to be permanent.
Author: Christopher Thomas, Economist