A little confused about Canadian real estate prices, and where they’re heading in the near term? You’re not alone. Home price data is starting to look a little confusing, even to the industry. RPS, the 30-year old property data giant owned by Brookfield, released its September home price index. The index, drawing from a larger pool of data than real estate boards, shows a clear deceleration trend forming. Home prices are still growing, but appear to be very much past peak growth. Not exactly the case seen with real estate board data.
Canadian Real Estate Prices Hit A New Record
Canadian residential real estate prices are on the rise, and hit a new record high. The price of a typical home reached $746,538 in September, up 17.13% from last year. A typical home on the urban index, which isolates major cities, hit $812,586, up 14.94% over the same period. These are record highs for both, with the narrowing gap between the two prices worth watching.
RPS Canadian Real Estate Prices
The benchmark value of a composite home in selected Canadian real estate markets, expressed in dollars.
Source: RPS; Better Dwelling.
Looking at the index, it appears markets are beginning to form a top. Monthly price growth fell by a third in September, compared to the previous month. Most of the major markets appear to be forming a peak, as monthly price advances slow. Two notable exceptions on the above chart are Hamilton and Halifax. The former was named the biggest bubble by the IMF, and still has a lot of steam left apparently.
RPS Canadian Real Estate Price Index
The indexed value of home prices for select Canadian real estate markets, showing their change from 2005.
Source: RPS; Better Dwelling.
Halifax isn’t in CREA HPI, so this might be the first time you’re seeing index prices for Halifax. To say it’s a booming market right now might be an undersell. That would surely sell over asking, to a lovely couple moving from Toronto.
Canadian Home Prices Are Still Climbing, But At A Slower Rate
One thing worth taking note of is the RPS indexes show high rates of price growth, but they’re on a sharp taper. Canada-wide peaked in June at 19.53%, and shaved more than 2 points by last month’s numbers. As for the urban index, it showed a similar slowdown over that period, falling from 17.25% to 14.94%. Both rates are still very high (any double digit growth is always), but it’s worth noting the slowdown.
RPS Canadian Real Estate Price Annual Growth
The 12-month percent change in price for selected Canadian real estate markets.
Source: RPS; Better Dwelling.
The national trend is much more obvious when the growth rates are viewed together, like above. After a March/April peak, when real estate activity topped, growth trends lower. This happens in pretty much all major markets, shows the data. Slower flattening in Hamilton and Halifax makes more sense looking at this chart. The growth they’ve seen dwarfs that seen in big investor markets like Toronto. Consequently, it will take a little longer for their cooling to resemble any other market.
The RPS indexes show a clear deceleration trend, but that’s not what board indexes show. The CREA house price index is expected to show acceleration in today’s release. Indexes conflict sometimes due to differing methodologies and data sources. Hedonic quality adjustments are a big one, where index data is adjusted for the quality of home. Qualitative adjustments are subjective in nature, and can produce interesting skews. Those skews can be amplified in certain markets.
Neither index is more accurate than the other, with both usually showing a similar trend. During a volatile market though, they can skew in different directions due to biases. It’s best to exercise extra caution in an environment like this when buying, and spend time with comps. One thing both indexes agree on is prices are a lot higher than last year. The issue is they tell a conflicting story about where near-term growth is heading.
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We use Brookfield RPS, and it’s definitely interesting considering it’s much more comprehensive than the MLS. That and we can actually pay for access, which isn’t even an option with CREA.
Does CREA or RPS have a guide with their hedonic quality adjustments publicly available? I can’t see to find the model, just the explanation of them.
Has anyone heard about the investigation into Realtors practices in Ontario and probably everywhere else? It’s on tonight. Don’t trust anything CREA says!
The powers that be want inflation so as to squeeze every last nickel and dime from Canadian deposits. Then when Canadians have spent everything on high priced basic things like food and water they’ll reverse everything and prices will crash to historic lows leaving the 1% and anybody smart enough to hoard cash significantly wealthier. The best way to move forward is to hoard as much cash as possible and incredibly reduce your consumption.