Canada

National Bank of Canada: Real Estate Prices Rise, But Could Change With The Recession

Canadian real estate prices climbed according to another index, but it had a limited impact on sentiment. The TeranetNational Bank of Canada House Price Index (TNBC HPI) made a substantial climb in April. Despite the big increase for prices, the Big Six bank warned a rapidly changing macro environment could change the direction of this trend.

TNBC HPI

The TNBC HPI tracks the movement of resale home prices across Canada. It’s similar to the CREA HPI, with the point of measurement being the difference. The TNBC HPI uses land registry data for their transactions. CREA and local boards use the date when the sale is entered into the MLS. CREA’s data point occurs before the land registry, but is also limited to only board sales. The TNBC’s data is later, but more comprehensive.

In a normal market, the trend might not look all that different – possibly a little delayed. In a rapidly changing market, more sales tend to fall through. The TNBC HPI would better capture the true movement of prices in this case. However, there’s still that registry lag to consider. April’s numbers are going to be a better view of where the buyer mindset was in March, than it will be in the actual month.

Canadian Home Prices Accelerate, But That Could Come To An End Soon

The C11, a price index of Canada’s 11 largest markets, showed a substantial movement last month. Prices increased 1.35% in April, when compared to the previous month. Compared to the same month last year, prices are now 5.27% higher. NBC noted the increase for April was unusually high, being twice the average gain for the past 10 Aprils. Six out of eleven of the cities reached new all-time highs according to the index. They warned this could change with the economy approaching a recession.

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.

Toronto Real Estate Prices Make Second Largest Climb

The index for Toronto showed one of the biggest gains across Canada. The index increased 1.99% in April, and is up 8.19% from last year. The monthly increase was second only to Ottawa, and puts the index at a new all-time high for prices.

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 Prices Stop Falling

Vancouver real estate prices made an annual increase for the first time in over a year. The region’s price index moved 0.61% higher in April, and is now up 0.36% from last year. Prices are still 4.39% down from the July 2018 peak, but annual gains have finally stopped showing declines. Just in time for a recession.

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 Prices Grow Nearly Double Digits

Montreal real estate prices were up almost double digits compared to last year. The index increased 1.67% in April, and is up 9.51% from the same month last year. The region’s prices are at a new all-time high, and the annual price growth rate is starting to look like a parabolic ascent. Although it would be surprising to see that continue, considering how quickly mortgage payment deferrals are rising in Quebec.

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 From 2014

Calgary real estate prices are still down after over half a decade. The index increased 0.20% in April, but that still places prices 0.80% lower than last year. Prices are still down 8.05% from the peak reached in October 2014. Yes, Prices haven’t recovered in over half a decade, and they appear to be getting worse.

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.

Overall the numbers looked strong, but there should be a little skepticism going forward. The report adds that high unemployment levels could mean homeowners are “unable to meet mortgages payments.” This could spark a flood of inventory, which in their opinion “could mean downward pressure on house prices.”

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6 Comments

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  • Marc 2 weeks ago

    “parabolic” in market terms means expectations jumped without a significant change to reality. Which sounds very correct.

    • Quincy Legere 2 weeks ago

      Which is correct for most of the stock market as well right now. The questions is what gives out first.

  • LT 2 weeks ago

    Retail sales are dropping. If people aren’t spending, someone’s not making money.

    https://www.bloomberg.com/news/articles/2020-05-22/canadian-retail-sales-plunge-in-first-weeks-of-pandemic-lockdown

  • straw walker 2 weeks ago

    My concern is the viability of the banks themselves..
    There used to be 6 or 7 schedule “1” banks in Canada.. now there somewhere around 25.
    A number of these will not make Christmas..
    These smaller banks that I’ve never heard of have been lending mortgages to sub prime clients and getting higher rates, but also have to be attracting a higher number of clients saving money. To encourage this they offer higher saving rates.. This all works out until their mortgage clientele no longer is making mortgage payments, either due to furlough or financial bankruptcy..
    What now exists is these banks are still paying out high interest on their saving accounts and not having the revenue to support it.

  • Manoj 1 week ago

    There are numerous private banks that are not even known by anyone who provide funding to subprime borrowers who have been speculating in real estate. Also these private lenders provide funding to small time developers who also speculate in real estate. Buying up teardowns and building sub standard quality houses and duplexes and flogging them with a 2,5,10 yr warranty.

    Teranet HPI index is fake, they use lagging benchmark prices which are fake numbers that the CREA produce. Benchmark pricing is often lagging by 8 months.

    • zalzon 1 week ago

      The so called shadow banking is behind many sub prime loans. The size of the shadow banking market is unknown partly because banks most of all did not want taxpayers to be aware of the massive default risk on sub-prime mortgages they were getting taxpayers to insure via CMHC. Apparently even CMHC wanted to keep it under wraps.

      With private insurers deliberately excluded from properly pricing the (enormous) risk, a whole lot of junk being ok insured by CMHC for peanuts seems suspect.

      I wonder if the CMHC chain can be charged with dereliction of duty for setting the taxpayer up for massive losses while profiting banks. Whos interest does he really represent? Certainly not the people of Canada who are the owners of CMHC.

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