National Bank of Canada: Don’t Take Real Estate Price Increase As A Sign of “Vigour”

Canadians must be entering election season, because not even real estate prices will give a straight answer. The TeranetNational Bank of Canada House Price Index (TNB HPI) showed prices increased in June. Economists at the bank warn not to read too much into  the increase, however. Without seasonal pressures, the index would have shown a substantial decline for prices.

Teranet-National Bank of Canada House Price Index (TNB HPI)

The Teranet-National Bank of Canada House Price Index (TNB HPI) is an index of price movement. It’s maintained as a partnership between Canada’s largest land registry operator, and a big six bank. The index is similar to the Canadian Real Estate Association (CREA) benchmark price, but there’s a few key differences. The biggest are when it’s measured, and how much data goes through each system.

The TNB HPI measures prices at the land registry,  and used the transfer data. To contrast, the CREA benchmark uses sales at the point of agreement, and ones conducted on the MLS. The MLS is the vast majority of sales, so most of the time they point to similar things. However, in fast moving markets, some sales never close but are make it into the stats anyway.

There’s advantages and disadvantages to both methods. By using agreements, CREA is able to give closer-to-market numbers.  By using land registry data, the TNB HPI gives us a more comprehensive look. Neither his better or worse, but they are different and each provides unique insights. Typical buyers won’t care about the difference,  but analysts – including the ones at your bank, use both. If you’re deep into housing nerdery, using both will give you a better picture.

Canadian Real Estate Prices Increased Due To Season Pressure

Canadian real estate prices made an unusually small increase, but they did rise… kind of. Prices in the C11, the eleven largest markets, increased 0.76% in June, from the month before. This brings the 12 month change to 0.51% higher than the same month last year, and 0.56% below the September 2018 peak. There’s a few notes to consider on this movement – other than the monthly movement is larger than the annual.

Teranet-National Bank HPI C11 (Annual Change)

The 12 month percent change of real estate prices in Canada’s 11 largest cities, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

The monthly increase is smaller than usual, and only increased due to adjustments. National Bank economists noted the 0.76% increase in June was well below the 21-year average for the month. The sole reason the index increased at all was due to seasonal adjustments. Unadjusted, the index would have fallen 0.4% in May, and 0.5% in June. They further note “the last two monthly readings cannot be take as a sign of market vigour.”

In plain english? Don’t mistake seasonal pressures for an increase in prices. Things are still moving lower in real terms. That doesn’t mean the outlook is necessarily bad. It means anyone that thinks is good is reaching though.

Toronto Real Estate Prices Up Over 2% From Last Year

Toronto real estate prices made a big move in June, representing almost half of the year’s total movement. Prices were up 1.33% from the month before, bringing them up 2.81% from last year. They’re still down 2.13% from the all time peak reached in July 2017, due largely to the gains made in the condo market. This is the third smallest annual increase for the month of June in the index history.

Toronto Real Estate Price Change

The 12 month percent change of real estate prices in Toronto, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

Vancouver Real Estate Prints 11th Month of Consecutive Losses

Vancouver real estate is still falling, even with seasonal pressures propping it up. Prices fell 0.28% from the month before, bringing them down 4.86% from last year. They’re now down 5.24% from the peak reached in July 2018. If that seems high, remember it’s a composite index and condo apartments haven’t fallen all that much at this point.

Vancouver Real Estate Price Change

The 12 month percent change of real estate prices in Vancouver, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

Montreal Real Estate Reached A New All-Time High

Montreal real estate prices printed another all-time high. Prices were up 0.882% in June, when compared to the month before. This represents an increase of 5.38% compared to last year. This is the 13th month in the past 15 Montreal real estate prices have increased. Recent performance has been robust, but this market had previously lagged the national. That is, they’re still playing catch up compared to other markets that have peaked and fallen.

Montreal Real Estate Price Change

The 12 month percent change of real estate prices in Montreal, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

Calgary Real Estate Prices Are Still Down After Almost 5 Years

Calgary real estate prices made a small decline, but the market is down after almost 5 years. Prices fell 0.06% in June, when compared to the month before. This brings prices down 3.75%, when compared to the same month last year. The region peaked in October 2014, and is now down 7.08% from then. Only Edmonton has been in a longer rut, and no other major market has fallen this much from peak. Even though the decline in June was small, remember seasonal pressures made it higher than non-adjusted performance.

Calgary Real Estate Price Change

The 12 month percent change of real estate prices in Calgary, according to the TNB HPI.

Source: National Bank of Canada, Teranet, Better Dwelling.

Canadian real estate prices are giving mixed signals, and low volumes don’t help. Higher prices are due entirely to seasonal adjustments, which will subside soon. It’s unclear if those pressures are enough to convince buyers to carry the positive throughout the summer. Lower volumes make it much harder to read, because they indicate fewer points of price confirmation.

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  • Zenity 5 years ago

    If you have in demand skills and work experience leave Canada. You pay 30-50% tax to keep boomers alive in their houses. What remains of your pay you pay 13% every time you buy something. Everything already cost 20% more than te states. What remains of those you have to use to pay for high rent or high housing price. What really are you living for here? Time to leave this crappy place and live where you can build a life for you and your family.

    • Expat 5 years ago

      I did exactly that and my savings have been amazing in recent years. Now I’m just sitting and waiting… 🙂

    • Mtl_matt 5 years ago

      The best part more than twice the money as other families that live in much nicer houses that you can’t afford while being financially cautious, just because they were of house buying age in 1995 instead of 2010.

    • M.Bury 5 years ago

      Actually on $150k income, taking not a single deduction or credit (i.e. RRSP, RESP, spousal, donation), using Federal and Ontario rates (other provinces are in the ballpark) an individual’s actual total tax rate would be 29.1%.

      Given this fact-based tax rate your entire tirade has now been fully debunked.

    • Average Man 5 years ago

      I mean, if you have skills like Leon the Professional, you can do us all a favour and make Boomers not alive in their houses.

    • Mark Benkovic 5 years ago

      I find it interesting that I had a similar opinion from my mechanic friend, who has a European background, just yesterday.

      I would tend to agree with your opinion to a point because there are several factors to take into account when considering a drastic change in the location where you live.

    • Beh G. 5 years ago

      Did just that… you don’t realize how much you’re getting ripped off in Canada (especially Ontario) until you move to Europe. We moved to Spain but one of our friends who moved to the Netherlands (one of the most expensive countries in Europe) says the same thing.

      The biggest problem in Canada are the hidden taxes, not income tax or sales tax which are more or less in line with Western European countries. The hidden tax is what you pay on every item that you purchase that are MUCH more expensive in Canada and is not necessarily collected by the government but distributors and wholesalers.

      When we left Canada, our grocery bill was around $250 a week and… we bought our alcohol from the beer/liquor store and pet food from the pet store. Our grocery bill here, including alcohol and pet food is less than half of that! Can and home insurance, 40% of what we paid, property taxes around 15% – not to mention that we are now mortgage free.

      So while we needed $150k gross income in Canada just to pay the bills, with 30% of that here you will actually be saving money, in a country with culture and history, much safer and with better infrastructure and healthcare, and most importantly no shortage of festivals and parties! 😉

      But the saddest part is when you sit down and calculate your CPP income… after 20 years of MAXIMUM contributions, you’d get roughly $600 CDN per month… in Spain, after 15 years of MINIMUM contributions, you’d get €600+ per month, roughly 50% more. That place is just a rip off of monumental proportions. When we came back to visit family last X-mas we spent more money in Toronto in 2 weeks that we spend here in 6 months!

      And moving here is much easier than many people realize. We have Canadian friends moving here from BC, Ontario, the Netherlands and even Costa Rica!

  • John 5 years ago

    Canada is the money laundering capitol of North America, and Trudeau should clamp down on it. If he doesn’t, then loyal patriots like the People’s Party of Canada Max Bernier will deter foreign money laundering.

    • rx81 5 years ago

      I left for a decade and came back…for family. Otherwise you’re keep nothing of what you earn here and fork out over a million dollars (which doesn’t hold any value anymore) for a small house on a small lot.

      The agents have the audacity to call 45 ft. lots “premium”. Extra premium if you are backing any sort of green space even if it looks like a landfill with some grass patches and they decided to call it a ravine even though you have no privacy since they put a walking path (calling it a trail) right in your backyard. Unbelievable what people are buying around here. Real estate agents stopped even trying. I went to an open house this weekend that was dirty..floor not even vacuumed or mopped and the description was a copy and paste from another listing so none of the features matched what was actually in the house…but the agent rolled his eyes at me when I asked about the incorrect description and told me “no one reads this”. He was 200% certain he would sell within a few days. In most areas of the US a house like that would sit on the market forever even if it was priced at less than 50% of the price here.

  • Investor 5 years ago

    Tick Tock.

  • Bluetheimpala 5 years ago

    Slow day. Tock.BD4L

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