Teranet: Canadian Real Estate Prices Decelerate, Toronto Plunges Further Negative

Canadian real estate prices are heading for negative growth, and fast. The TeranetNational Bank of Canada House Price Index (Teranet HPI) shows many markets at new record highs when it comes to prices. Record high prices are meeting higher interest rates though, and sending growth to multi-year lows.

Teranet HPI Vs CREA

The Teranet HPI is a similar concept to CREA’s benchmark, but with a slight difference – when the data is measured. Teranet uses land registry data, meaning the sale must be completed, and the buyer in possession. CREA uses MLS sold information, which is taken when the sale is closed, but weeks before the transfer. Usually not a lot changes between contract and transfer, but sometimes it does. In a rapidly cooling market, we’ve discovered that more people walk away from sales. For example, last year at this time, nearly 1% of MLS sales fell through in Toronto. The trade off is speed for accuracy, so they’re both useful – just for different reasons. Got it?

Canadian Urban Real Estate Prices Hit An All-Time High

Canadian real estate prices hit a new all-time high according to the C11, their index of 11 major cities. Prices increased 0.94% from the month before, bringing the annual gain to 2.87%. If that seems like low growth, it is relative to recent gains. This would be the lowest annual increase in prices since 2013. This trend has shown 12 consecutive months of price growth deceleration.

Teranet-National Bank HPI C11 (Annual Change)

Composite aggregate of home prices in Canada’s 11 largest cities.

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

Toronto Real Estate Goes Negative For A Second Month

Toronto real estate prices plunged deeper into negative territory, according to the index. Prices increased 1.15% in June, but the annual change is now a 2.8% loss. This is the 12th consecutive month of annual price growth deceleration, and the second it has been negative. Toronto’s prices hit peak in July 2017, just over a year ago.

Toronto Real Estate Prices (Teranet-National Bank HPI)

Annual percent change of real estate prices in Toronto.

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

Vancouver Real Estate Prices Hit A New High

Vancouver real estate prices have hit an all-time high, but price growth is tapering. Prices increased 0.56% in June, underperforming the country for the monthly gain. That brought the annual gain to a still massive 13.28%, but growth has begun to taper. Two months of tapering growth isn’t exactly a trend, yet at least.

Vancouver Real Estate Prices (Teranet-National Bank HPI)

Annual percent change of real estate prices in Vancouver.

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

Montreal Real Estate Hits An All-Time High

Montreal real estate hit an all-time high, but didn’t buck the general trend of deceleration. Prices increased 0.7% in June, bringing prices 3.59% higher than last year. Prices are now at an all-time high, but the annual gain did decelerate for a 6th consecutive month. This is the only market of the three that is seeing sales grow.

Montreal Real Estate Prices (Teranet-National Bank HPI)

Annual percent change of real estate prices in Montreal.

Source: National Bank of Canada, Teranet, Better Dwelling.
Canadian real estate has seen both record sales and price growth over the year. It shouldn’t be a huge surprise to see prices cool, as demand drops. Combined with higher interest rates, you have little  reason to believe price growth wouldn’t drop. The Bank of Canada’s rate hike yesterday, isn’t likely to push the trend in the other direction either.

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  • Ian 5 years ago

    Yesterday’s hike was the coupe. It’s also important that we didn’t hike yesterday because of fundamentals, we did it to control inflation. High levels of inflation are typically a sign of currency collapse or the end of the business cycle.

  • Grizzly Gus 5 years ago

    Honestly, I think the leafs signing John Tavares pretty much guarantees that Toronto home prices have hit bottom and soon we will start seeing 10% YOY growth again. Think about it

    • Justin Thyme 5 years ago

      Perhaps you are more accurate in your analysis than you think. The ‘butterfly effect’. Chaos theory. A small and seemingly insignificant change leads to others that eventually become very significant.

      I do not know how mathematical you are, but here is a conclusion drawn from economic theory and hypothesis postulating from the nid last century.

      ‘How does this multiplier-accelerator reveal “cycles”? In fact, only parameter ranges (b , c) which are in situation E (constant oscillations) will yield constant cycles. All other parameter constellations will result in something else — either complete stability or complete instability – (whether monotonic or oscillating). Thus, regular cycles are “structurally unstable” in the sense that they emerge only if there is a precise parameter constellation and any slight movement or displacement of the economy from these parameter values will end the regular cycle dynamics and enter into either explosive or damped oscillations. Thus, the Samuelson multiplier-accelerator model, as a model of the cycle, is incomplete as a theory of regular “cycles” as such, but a great advance in the theory of “macrodynamics” and fluctuations in general.’

      From ‘The Samuelson Oscillator’ https://cruel.org/econthought/essays/multacc/samacc.html

      This is regarding business cycles. Did you note that bit about ‘either complete stability’ or ‘complete instability’?

      Seems that our economy has entered into this period of complete instability – rapid gyrations. Like I stated before, analogous to the heart going into fibrillation. The parameters are no longer in that ‘goldilocks zone’ for cyclic behavior. The business cycle is dead. Predicted by theories about one hundred years ago. Except that Kensyan theorists went out of fashion.

      It’s all about the intersections of non-linear curves, postulated well before ‘cat…’ theory, but it has the basis of the theory at its roots (pun intended). The switching of equilibrium states rapidly and suddenly as thresholds are crossed. Discontinuous graphs.

      From one moment on the graph to the next, it is just as likely to go up,or to go down, or (most unlikely) to stay put. Next month, housing prices could be back up, could be down. There is nothing ‘stable’ about the economy.

      Not until the basic parameters are brought back ‘in line’ in relation to each other will the graph settle down. Bit there is too much turmoil, too many conflicting things changing the basic parameters, for that to happen anytime soon.

      • Grizzly Gus 5 years ago

        A wise man once told me that all economists are low on the intelligence totem pole.

        What do you think JT? Is it time to buy a bunker, some chickens, a greenhouse, a gun and get the hell of the grid?

        Also do you recommend using a traditional mouse or a mouse pad for cutting and pasting? Personally I hate mouse pads.

        • Justin Thyme 5 years ago

          Actually, I met someone who had gone completely ‘off grid’. They ran a hunting lodge deep in the BC wilderness. And the home had ALL the comforts of any modern home. It was a huge house. All modern appliances. All of the contemporary electric kitchen gadgets. You could just as easily imagine yourself in the middle of Vancouver as out in the middle of nowhere. Windmill, solar panels, wood burning boiler driving a turbine for electricity and heating system. There wasn’t a hydro line or gas line anywhere near the place. Wood for fuel came from the extensive forests around them. They could also be self-sufficient in food, although the selection would be limited. They did not have cows and beef. Meat, chicken, and fish was no problem, however, and they had goats milk.

          But they still used gasoline automobiles and trucks to get in and out, and brought propane in for the huge modern gas cooking stove and BBQ grill. And even though one of the owners was a mechanic, they still relied on repair parts from the ‘grid’ world. And they had wi-fi, internet, and full TV reception through satellite links. Oh, and they also traveled deeper into the interior by plane.

          Exactly what does ‘completely off-grid’ look like?

          If you recollect, these are economists from 100 years ago, when there was actually some intelligence in their ranks. When they were smart enough to recognize the genius of Keynes. When there were serious students. When MBA programs did not exist, to draw away the bright ones. Not the wannabe experts of today who think it is a career path to politics and cushy government jobs. The ones who are not smart enough to get into an MBA program, so take economics instead.

          But ONLY if you want your eyes opened, here is a reference for you


          Please understand where I am coming from – I was born just after the head tax was repealed. My parents were very much alive when it was in place.

      • Bluetheimpala 5 years ago

        You’re back JT! oh frabjous day callooh callay! I honestly tried to read your post to understand your overall point but midway through my brain colluded with my penis to ‘zone out’ thinking of boobs. It would appear you’re too high level, like stratospheric and I would officially like to request this blog change to ‘JT Dwelling’. It will be like Breitbart where we just sit around spouting off conspiracy theories and new age economic concepts, sprinkled in with some ‘GO CANMADUH, FUCK (INSERT GROUP)’ in a perverted feedback loop that makes sense to only us. Live in the light. BD4L.

        • Justin Thyme 5 years ago

          Like the old well-worn line goes, “Beam me up, Scotty. No signs of intelligent life around here.”

          But it is unfortunate that you do not have the intelligence to follow it.

          Well, keep blathering about your uneducated opinion of what you THINK will happen, and let the economy do what the economy is going to do, and see if there is any relation between the two.

          And let the Robert Mercers clan up.

          • Meena 5 years ago

            Keep it coming Justin Thyme. I’m interested. Pointing out a system-wide problem is not equivalent to espousing conspiracy theories. So far I haven’t seen an intelligent rebuttal to your argument.

          • Justin Thyme 5 years ago

            Perhaps you will be rewarded soon. There are a few PHd theses coming out on the topic. The discontinuities have caught the attention of a good number of academics who are trying to make sense of it. Cat… theory, chaos theory, the idea that the curves are indeed not linear but curved, the change from an expanding to a maintenance economy, phony vs real money (as revolutionary an idea as the recognition of good money vs bad money – you might want to research exactly what the definition of good and bad money is, it is not what the popular press thinks it is) are all catching air.

    • Trader Jim 5 years ago

      lol, yup. To infinity, and beyond!

      Rate hike didn’t send the loonie higher. That should tell everyone what they need to know about the value of Canadian assets.

      • Justin Thyme 5 years ago

        But Trump’s bluster about trade tariffs isn’t sending it any lower, either.

        Is one canceling the other?

        The economy is not just about stock prices, interest rates, and real estate values.

        • Bluetheimpala 5 years ago

          You’re right…it’s about gummy bears, unicorns, vibranium and sunshine! Oh wait, this is Canada and not Wakanda…you have me worried JT. Please get back on your meds. I remember the good ol’ days when you brought more than comedic relief to my life. BD4L.

        • Joe Blow 5 years ago

          Justin Thyme,

          lol…if its not about stock prices, interest rates, and real estate prices. what IS it actually about? Id love to know. let me take a guess…

          Oil? – last time I checked thats inflating in price.

          CAD? – its likely to drop even further compared to the usd.

          wages? – average wage goes up about 1.8% but I the essentials to survive like food, gas, housing has increased in much greater numbers. Also as miminum wage went up, so did the amount of kiosks to make your order at timmys, mc d’s, and A & W.

          retail? – I think theres more retail stores closing. all the useless stuff we dont need is on sale.

          247 trillion global debt? is that a sign of the economy doing great?

          • vnm 5 years ago

            The egomaniac is at it again, despite repudiation of his lunatic ravings about Catastrophe Theory by the very sources he refers to.
            To “rehash”, this is the closing sentence of the article he references, by its author, a renowned Cornell University mathematician:

            “When applied to economics, sleep, ecology or sociology, it’s …… [Catastrophe Theory] is a stylized scenario that shouldn’t be taken for more than it is: a speculation …”

            Having skated over that, he has the gall to invoke it’s related cousin “Chaos theory” as a contemporary and superior model of our current economic environment.

            Similar to Catastrophe Theory, Chaos Theory is fundamentally a class of
            mathematical equations which have been found to be useful in describing
            “non-linear” events such as storm cloud formation in tranquil blues skies.

            Consider that if indeed there was a mathematics that could reliably
            predict hurricanes — and economic chaos — it would hardly be a secret to everyone but some idiot who copies, pastes and misrepresents cherry picked information from facile Google searches.

      • SCE 5 years ago

        Maybe because it was well expected? Do you understand how the market works?

        • Someguy 5 years ago

          There is a difference between very likely and certain, and one could be forgiven for thinking that markets would take that into account.

  • Justin Thyme 5 years ago

    Real estate primer 101.

    When house prices go up or down, they do not go up or down for just the buyer or seller of that particular home, they go up or down for everyone, even if they do not sell.

    The typical homeowner looks at the price that neighborhood houses are selling for, and says ‘that is what MY house is worth’, and makes decisions accordingly. They borrow, spend, make plans, as if they are ‘that rich’ or ‘that poor’, Their actual fiscal position – cash on hand, income, cash flow – is irrelevant. it is how rich they THINK they are, not how rich they are in real money.

    But that house valuation is phony money. It is not real wealth. it is only real wealth, real money, when they actually sell it. Homeowners SHOULD act as if their house was worth zero, that their wealth was based on actual ash and cash flow. THAT is what they have to spend.

    But wait, homeowners can so easily turn the phony wealth of their house into phony cash, by borrowing on it. They have cash to spend, which really doesn’t exist. They think, just because they have that phony cash in hand, they are worth that much. That is, the money in their bank account is borrowed money. Money that really doesn’t exist. (Money that has been counted twice – in the hands of the lender, as assets, and in the hands of the borrower, as cash in the bank, depending on the metric measured). So when a home is sold for a million, everyone gets that million who, although they did not sell their own home, borrowed or acted as if the home was worth a million. Based on that one sale. (Okay, based on the aggregate of all recent sales).

    So the economy actually has TWO measures of money supply – the real money and the phony money. Money that was put into their account from their borrowing. On paper, it looks like real money available, but it is not. It is borrowed, phony money that is available.

    Same as consumer spending. There are two measures of consumer spending – one that uses real money (cash that the buyer actually has) and spending that is done on credit (money that actually doesn’t exist, that is counted twice). The consumer spending on credit gets counted twice – once when the transaction is made (retail store sales figures), but it is not actually paid for, and again when the borrower pays off the tab (household spending figures, including credit payments, against income – cash flow) depending on the metric that one is looking at ).

    Same as the value of a home. There is the cash paid for purchase (purchase price) and the price ACTUALLY paid, over time (the net, final price) after interest payments. Again, TWO values for the price of a home, depending on the metric you are looking at. The initial price, and the phony price after interest. I know, there are actually THREE prices – one that includes closing costs, and also subtracts commissions.) Put another way, if I have a one million dollar home, and I owe $600,000 on it, to me that home is today really worth one million LESS the total future interest payments I am going to make on it. It only looks like the home is worth one million, on paper. But that is NOT what I am going to pay for it, eventually.)

    So when ONE house drops in value, the damage to the economy is not seen to be just the loss of that one house to the ‘REAL money supply’, but the loss of that one house multiplied by every other house, weather sold or not. The phony money supply. Even though the economy has lost perhaps $100,000 in real money on that one house, when it is extrapolated to all houses, it LOOKS like the economy has lost billions of dollars in phony money supply. Based just on a few (comparatively) real transactions. Same with the stock market.

    So all of the metrics have two values – the real value, and the phony value. Of course, when the phony value of one metric is used with the real value of another metric, very false results occur. Everything gets obfuscated.

    So how, exactly, do you make any sense of what were supposed to be leading indicators, when they are so bastardized by phony money (money that has been counted twice, in different ways, in different metrics)?

    As The Wizard of Oz predicted, coming off the gold standard, when ALL money turned from good money to bad, was the inevitable collapse of the economy. The poor sot just did not realize that it would eventually be compound interest, credit borrowing, and a switch from an expanding to a maintenance production economy that would spell the demise. Everything about the economy today is just smoke and mirrors – or rather measured through smoke and mirrors. The REAL economy is still there, underneath everything, doing exactly what it should.

    But one thing is for sure – real estate prices will go up, they will go down, and they will stay the same. All at once, in different areas of the country, but never following any identifiable pattern.

    • Sam 5 years ago

      Dude, you know there’s something wrong when your comments start to become longer than the article!!

      • Justin Thyme 5 years ago

        That the article is too short, and non-informative?

  • The Top is in? 5 years ago

    I think so, but time will tell, give it some time for it to settle in for others.

    If things do not pick up the pace in the top performing months of the summer, more and more investment properties get listed on the market the more people are convinced its the time to sell off thier assets before other investors decide to do the same.

    Can’t help to think of this paired with the next time the BOC is going to grab the mic and announce another hike.

    • John 5 years ago

      … the top performing months of the year just passed…

      If things improve from here then the whole industry is in fibrillation.

  • vnm 5 years ago

    With respect to our screamingly NPD poster, some potentially helpful insights from Psychology Today:

    “Things have changed. Current thought challenges the notion that narcissists secretly suffer from low self-esteem or insecurity. Or that they suffer as much as we thought in the ways that we thought. Recent findings indicate they take pleasure in successful manipulations. Putting down unsuspecting, soft-hearted souls in their midst is a sport. They truly believe in their superiority even if objective evidence does not back it up … they make everyone around them feel badly but they don’t feel badly themselves.”

    “Your wanting the narcissist to suffer is completely understandable, and it’s wonderfully fortunate that the best way to make him suffer is also the best thing for you. The technique to make him really suffer is — wait for it — ignore the living daylights out of him.”

    • Justin Thyme 5 years ago

      Why are you describing yourself? Makes no sense.

  • SCE 5 years ago

    Since no one else is mentioning it…. https://business.financialpost.com/real-estate/toronto-condo-rents-skyrocket-as-supply-reaches-critically-low-level

    “Average rents rose 11.2 per cent in the second quarter compared to the same period last year, hitting $2,302 for an average unit of 732 square feet, according to Urbanation Inc., a firm that collects and analyzes data on the Toronto condo market.”

    Any thoughts here? Or shall you’ll choose to ignore?

    • Grizzly Gus 5 years ago

      I said before I thought rents would do well for a bit. Less sales less people buying homes, need to live somewhere. Lots of competition for available units. People selling and renting have big chunk of cash, and can bid things up. At least 50% of units hitting the market over the next couple years are investors who will need to sell or rent out. When newer landlords get spooked they will kick out tenants temporarily lowering overall supply. Once recession hits and/or a bunch of the record supply in development hits then all rents will eventually revert back to what the average cost of rent is with legacy rental control units, maybe lower in an extreme scenario. Most of the city is not paying the prices you quoted. Rents started dropping in Seattle a few months ago, looks like it just started to turn in Vancouver. Keep an eye on those markets.

      • SCE 5 years ago

        Where is this recession? The economy is going strong. Employment is great, economy is growing, housings starts strong. What are you seeing that everyone else isn’t?

        • C 5 years ago

          DEBT, DEBT, DEBT, DEBT, DEBT and more DEBT.

        • Grizzly Gus 5 years ago

          Housing starts extremely strong – good for construction sector for next couple years.

          Employment numbers out side of that………. private had a net loss on last report. Where private was strongest was in construction and manufacturing. One of these very susceptible to what ever Trump had for breakfast on any given day. Most gains in public sector.

          As I said, recession and/or when all the record supply hits…… Got a bit of a runway before all the supply hits but I do think we get the recession first. Why? 1. Rates going up 2. A ton of our gdp growth over past decade has been related to housing sector, agents and mortgage brokers are starting to take a beating eventually this will work its way through to banking profits and construction sector. 3. Wealth effect, consumers will start spending less if they do not feel as rich due to their homes appreciation. 4. Debt servicing costs – Even if some of us here overestimate the ability of recent buyers to sustain their debts with higher rates, each additional dollar they have to spend on debt is one less dollar to buy coffee, vacations, toys etc with.

          Not saying a recession will start today or tomorrow, but it is coming (I would say a year to two max). If someone forgets to cut the crust off Trumps toast one day and he decides to take it out on Canada could happen a lot sooner. China’s economy also looks very risky right now. If they go down there goes the biggest consumer of commodities.

      • vnm 5 years ago

        The new Toronto airBnB rules have been held up due to OMB appeals, be interesting where it ends up. There are literally street wars raging in residential neighbourhoods, and with the low rental vacancy rate can’t see how they won’t go forward. It would both take some air out of the balloon, and discourage investors from buying properties for short term rental.
        But who knows what vested interests are behind the appeals, the city has limited resources to fight them in court.

        • Depth386 5 years ago

          I’m no condo investor but any time the government tries to tell a private citizen what they can’t do with their own private property, I cheer for the side that represents freedom.

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