Canadian real estate prices are still fast-growing, but showing signs of cooling. The Teranet–National Bank of Canada House Price Index (TNHPI) hit a new record high in July. Annual growth for the index shows acceleration for every month for a whole year now. Signs of cooling exist though, including falling home sales and over half of the index cities underperforming.
Canadian Home Prices Have Seen Annual Growth Rise Almost 18%
The C11, an index of the country’s largest real estate markets, showed substantial gains. Prices increased 2.0% in July, and are 17.9% higher than the same month last year. It was the 12th consecutive acceleration for the index, and the largest on record. Momentum will carry the index in the short-term, but National Bank of Canada (NBC) observed cooling.
Teranet-National Bank of Canada House Price Index
The 12-month change in the indexed value of home prices in Canada’s 12 largest real estate markets.
Source: TN HPI; Better Dwelling.
Canadian Home Price Gains Shrunk and Sales Are Falling
The index showed price growth acceleration and home sales are both slowing. They note it was the second month to see monthly gains shrink, though they’re still very large. In regards to home sales volume, they also reported a similar situation to CREA — a drop in volume. Over the past few months, sales have tapered consistently, relieving pressure on inventory. NBC economist Daryl King said, “… [this] could mean a slowing of price rises in the coming months.”
Fewer Than Half of The Index Cities Outperformed For Growth
One interesting point to note here is the index was led by less than half the market in the C11. The cities that outperformed the national index were Halifax (33.4 %), Hamilton (30.1 %), Ottawa-Gatineau (28.9 %), Montreal (21.4 %), and Victoria (21.1 %). These are all relatively small, but high-growth markets — Montreal being an exception.
The other six markets underperformed the national index, and weighed it down. Toronto (17.4 %), Vancouver (17.1 %), Winnipeg (10.5 %), Quebec (10.3 %), Calgary (7.5 %), and Edmonton (6.5 %), came in under. Though Toronto and Vancouver were only slightly under those numbers.
The TNHPI uses registry data, producing the most accurate measure of growth. This does have one drawback though — it can produce a lag compared to the CREA index. The latter uses market data, but isn’t confirmed for a few months. Since CREA data is showing price growth deceleration, NBC seeing slower price growth coming isn’t totally out there. In fact, it might already be present.
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Prices are going down with lumber
Lumber price was over 1.500 in May 2021, now its only 1/3 of that price with forests burning everywhere. Market is unpredictable.
Price growth slowing means prices will increase but not as fast. Its different from price decline.
Overall with all the extra money supply in circulation prices will not decline.
The same as was prediction for lumber prices, in May of 2021. Forests are burning, supply is less, lumber price now is one third of it was 4 months ago.
No one knows when prices stagnate, crash or go up.
The extra money will go to paying off debt which destroys money because money is debt. The less debt, the less money, the cheaper houses become because of the less money in circulation. Canadian corporations and individuals are loaded with debt, most are or will be paying it off before the rate hikes. It’s either pay off debts now or get slaughtered with rate hikes. Either way home prices will crash. The suckers born last minute will lose their homes.
Can anyone explain to me where all of that extra 30% M2 (printed money) will go? Its not going to disappear, asset prices will go up. Please also explain how people with any basic economics education would expect prices to fall?
The folks with advanced economics training are more concerned about those with the basic training who don’t understand modeling limitations and how money actually enters into circulation.
M2 money supply isn’t what inflates real estate valuations, as homes are largely not purchased with cash. Real estate valuations are influenced rather by access to and demand for credit.
There is a degree of irony here to make such a statement and then question other dwellers’ understanding of “basic economics”.
Oh, I see you dont make your down payment with cash/M2. Ironic that you keep pointing to economic education.
I said -largely- not purchased with cash.
As in the vast majority of a home is purchased with credit.
Which segues back to my point: Real estate valuations are influenced by access to and demand for credit, not so much M2 money supply.
The actual increase in the M2 money supply averages to around roughly $1000.00 a person. That’s rather insignificant when you look at the fact that mortgage rates have been artificially lowered via BOC involvement to historical lows; to the extent of being lower than the rate of inflation. Meaning borrowers pay negative real interest and are incentivized to borrow as a result. This is where access to and demand for credit is exemplified.
Does that help you?
typo – $10,000.00 a person.
It’s called wealth destruction, if that money goes to paying off debt it destroys the extra money printed leading to deflation. Example, Japan.
M2 will not disappear, its basically cash people hold…… That is why I specifically said M2 instead of money supply.
Explain us how average Canadian family with average Canadian income of 63.000 annual can afford 1.2 million house in GTA?
1.Slavery for every family member for 25 years.
2. in slavery for 5 years and give it back to the bank.