Canada

Teranet-National Bank: Only 3 Small Canadian Real Estate Markets See Prices Rise

Canadian real estate price growth is cooling, with the market making unusual moves. The Teranet National Bank of Canada (HPI) showed Canadian real estate markets made a rare decline in the month of November. The monthly decline was observed across the country, with only 3 small markets making a gain.

Teranet-National Bank

Feel free to skip this if you’re a regular reader. For new readers, The Teranet HPI is a home price index. It’s similar to the Case-Shiller in the US, run by National Bank and Teranet. National Bank is a Big Six bank, and Teranet is a private land registry behemoth. The index is similar to the CREA HPI, giving us a weighted index of home prices. While the concept is similar, when and where they take the numbers gives us different results.

The Teranet HPI and the CREA HPI measure different points in the home buying process. Teranet, being a land registry, measures after the transfer process is completed. CREA measures only MLS sales, at the time of closing. Since the vast majority of home sales are done on the MLS, and they are usually similar. However, in a volatile market like the one we’re in, more sales go private and some fall through. The CREA HPI would fail to capture that, while the Teranet HPI would. They’re both great, but very different. It’s definitely worth checking both out if you’re a pricing nerd.

Canadian Real Estate Prices Make Unusual Decline In November

The C11, an index of Canada’s largest city, dropped on the month but remained positive year over year. Prices fell -0.28% in November, when compared to the month before. They remain 3.05% higher than the same month last year. Only Quebec City, Halifax, and Victoria experienced a monthly gain for November. This was the second consecutive monthly decline, and there’s a few other notes.

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.

The decline is irregular, and the positive year over year is due to last year’s print. A monthly decline for November is highly irregular, only occurring 4 times in the past 20 years. The annual gain looks good, but is actually due to the abrupt decline last year from August to October. TL;DR, prices didn’t fall as fast as last year, so it looks like price acceleration, but it shouldn’t be read that way.

Toronto Real Estate Prices Are Down 4.12% From Peak

Toronto real estate prices are up annually, but still below their all-time peak. Prices declined 0.10% in November, when compared to the month before. The annual pace of growth is now 3.25%, slightly higher than the month before. Like with the C11, the acceleration of the annual price gain is due to prices not falling as quickly as last year. Prices are now 4.12% down from the peak reached in July 2017, a tenth of a point more than they were last month.

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 Continues To See Price Growth Taper

Vancouver real estate prices had one of the largest drops in the country, last month. Prices for the city’s market fell 0.63% in November, when compared to the month before. The annual pace of growth also fell to 3.93%, leaving the market 1.79% lower than the peak reached in July 2018. The Real Estate Board of Greater Vancouver (REBGV) is also seeing similar numbers being printed.

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 Is Just Off Of The All-Time High

Montreal real estate, Canada’s hottest market, is just off of all-time highs. The city’s composite market fell 0.11% in November, when compared to the month before. The annual pace of growth reached 4.39%, a large taper compared to last month. Prices are 0.11% lower than the all-time high hit in October.

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.

The unusual monthly decline for November accompanies an unusual market. Just over a year ago, the whole country printed the largest ever gains. These gains were fueled by the largest credit expansion in Canadian history. Now that the credit expansion cycle is approaching contraction, we get to find out how much all of these homes are really worth.

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12 Comments

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  • Ethan Wu 5 months ago

    Everyone that bought at peak must be celebrating that price growth is accelerating, not realizing they’re down even more money. 😂

  • Ahmed 5 months ago

    The contraction is coming? Canada’s water is already broken, and the ambulance is on the way.

  • Trevor Schwartz 5 months ago

    Ahhhh… So the acceleration game is probably the same thing with CREA. Why isn’t anyone mentioning it?

  • Monty Albert 5 months ago

    As the Canadian Dollar drops in value because of Debt, approximately 700 BILLION AND CLIMBING AT THE RATE OF 2 MILLION PER HOUR. See Canadian Debt Clock on Google.
    Price for Real Estate will climb, you will need more dollars to buy it.
    A Billion is a Thousand Million. This is an unbelievable debt for a s mall population to handle when the
    deficit is adding 20 Billion a year to the debt.

    • Smaug 5 months ago

      What you just described – Canada being strangled by debt – is not bullish for real estate.

  • Jay 5 months ago

    in other news, bankruptcy/insolvencies is on the up and up by 20% in BC and PEI. I remember BD mentioning something about that in one of their articles… I wonder how those brilliant RE investors are holding up?

    https://www.huffingtonpost.ca/2018/12/10/consumer-insolvencies-canada_a_23614259/

    • SUMSKILLZ 5 months ago

      I’m always surprised how few people go bankrupt in this economy. All it takes is involuntary job loss and the passage of time for financial assets to be consumed. Obtaining a new job similar to the old job (salary, benefits) generally has low odds of success in this new world of precarious contract work. Not everyone, but far too many people. This is especially true for public sector workers who find themselves outside the walls of Xanadu, unable to get back in. Things unravel fast.

  • ken 5 months ago

    Regarding Vancouver:
    ” leaving the market 1.79% lower than the peak reached in July 2018″
    Laughable. So far from reality as to be a bad joke. Vancouver houses down MINIMUM 15% and now condos down MINIMUM of 5%.

    And this is our “Alternative” source of info? Sad. We need a new and real alternative info source.

    • Smaug 5 months ago

      Just talked to someone who visited a relative in GTA over the weekend. They’re down $400K on their formerly $1.6 M house (comparables on their street were selling for that in winter/spring 2017). They’ve given up listing it after several price reductions, the most recent down to $1.2 M with no bites. I’m no math wizard, but $1.6 M to $1.2 M sure looks like a 25% drop to me. And even $1.2 M is obviously above the current market or it would have sold.

    • John 5 months ago

      Which market indicator should be used to identify the price declines you have quoted?

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