Teranet: Canadian Real Estate Prices Drop Most In 7 Years, Led By Toronto

Teranet Shows Canadian Real Estate Drops Most In 7 Years, Led By Toronto

Canadian real estate prices may be softening. Numbers from Teranet show that home prices generally declined across the country in September. This decline is led by a drop in prices around the Greater Toronto Area, extending through the Greater Golden Horseshoe. Although not all markets saw decline. Vancouver is once again leading the 11 city composite index in monthly price gains.

Who The F**k Is Teranet, And Why Should I Care?

Teranet is a land registry behemoth that operates, amongst other things, the land registries in Ontario and Manitoba. They build a Home Price Index with National Bank of Canada, that uses land registry data to compare how prices on the exact same house evolve over time. That is, they only use homes that have been sold more than once. This is known as a “sales pair” analysis, and is the kind of the stuff common in the US.

One of the the things they produce is an index for 11 cities, which they combine in an urban index. It’s debatable if it’s more or less accurate than CREA’s urban index. However, if you’re into national housing stats – you should be checking out both.

Canadian Real Estate Prices See Largest Drop Since September 2010

The Teranet National Composite House Price Index fell in September. The index experienced a 0.8% drop when compared to the month before. National Bank of Canada analysts noted this is the largest drop since September 2010. This is also the first time the 11 city composite has dropped since January 2016. While a single  drop isn’t a huge concern, the first after a long trend should be noted.

Source: Teranet-National Bank.

Toronto Leads Declines

The monthly drop was led by Toronto, Canada’s largest real estate market. From August to September, the city experienced a 2.7% drop. Four other cities in the 11 city composite also saw declines:  Quebec City (−2.3%), Hamilton (−1.9%), Halifax (−0.4%) and Winnipeg (−0.3%). Victoria saw prices stay flat.

Source: Teranet-National Bank.

Second Month of Deceleration From Record 12-Month Gains

Despite the monthly decline, annual gains are still around – although tapering. September 2017 represented an 11.4% gain when compared to the same time last year. This is down from the record 12 month gains observed in June and July 2017, when it was 14.2%.

Source: Teranet-National Bank.

Prices Climbed In Five Markets

Not all of Canada experienced lower prices. The other five cities saw monthly price increases: Vancouver (1.3%), Calgary (0.7%), Montreal (0.3%), Ottawa-Gatineau (0.3%), and Edmonton (0.2%). With the exception of Vancouver, these markets have not had a price boom over the past couple of years.

14 Additional Markets Saw Declines, 12 Were In Ontario

Fourteen markets outside of the 11-city composite also experienced declines. Twelve of those, are in Ontario. The greatest Ontario declines were all observed in the Greater Golden Horseshoe: Barrie (−4.5%), Brantford (−1.3%), Kitchener (−1.4%), Oshawa (−3.3%), and Peterborough (-0.7%).

Source: Teranet-National Bank.

The monthly decline was large, but not enough to plunge annual gains into decline. This is only the second month of price growth deceleration, so don’t call it a trend. However, there is mounting concerns about prices falling around the Greater Golden Horseshoe. The economic engine of Canada seems to be seeing prices drop, almost as quickly as they climbed earlier this year.

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  • Teranet Trumps CREA 7 years ago

    Another difference between CREA and Teranet, Teranet uses registry data. This means they only get completed sales, and sales not processed through the MLS. This is important for cities like Vancouver, with more off-market transactions.

    Teranet = way more accurate.

  • bluetheimpala 7 years ago

    I have a family member in real estate. While it is too early to tell, and I’m not playing chicken little, here is what I just observed in Oakville in Oct. Detach, 3br,3 bath and only 2 piece ensuit, good lot size, DOM 20 @ $830K (another agent who tried to swoop in said it would go for $950 in under a week). Similar house with larger rooms and full ensuite but small overall lot just sold for $770,000, DOM 3. Seller is going to drop price to $788 and hope for a bidding war but, I suspect they will get an offer of around 95% of list, mid $700s and sell. They bough 2 years ago for $530 and were trying to bank almost a quarter-milli in profit.

    I’ve said it before and I’ll say it again…the burbs are going to burn. Everything has flipped; psycho, demo, behaviour. Anyone with any equity will need to get out to realize a profit. Anyone with high ratio mortgage has to get out or risk negative equity. Anyone with substantial leveraged will want to get out. Investors who can’t make 30% returns will get out and look for other markets (greay market lending??).

    Buutt…if we’re going this quickly to the bottom I have hope that within 2 years everything will be back to normal*
    *What has happened is not normal but better than losing $$$ on your assets..3-5% gains would be nice.

  • tim 7 years ago

    absolute hogwash….”Victoria saw house prices stay flat”. It makes me question this ENTIRE article

    August to September 2017 numbers courtesy of Victoria Real Estate Board:

    Single family housing
    Aug Sept
    Median 749,900 795,000
    Average 831,883 884,196

    Median 367,500 390,000
    Average 414,637 488,348

    As you can tell prices here in Victoria continue to skyrocket. They can’t build homes fast enough here

    • brent 7 years ago

      The prices may appear to be higher, but it is because the mix of sold properties has changed to include more high-price properties.

      The teranet is better because it includes sales of the same properties, so distortions due to changing mix of sales is not a factor.

      • tim 7 years ago

        Then explain why construction is going flat out here when prices are falling? 8 of the 10 tower cranes up are building residential high rises with another 3 towers breaking ground this month. Single family housing is also going nuts

        You can’t find a labourer, carpenter anywhere, the big excavation contractors are booked over 6+ months out, and many contractors are turning down work. No one is building housing if pricing is falling!

        Where is this data to back up that housing prices stayed flat here? I provided data that says the exact opposite

        • brent berry 7 years ago

          A lot of the construction underway are units that were sold 2,3,5 years ago. The purchasers have promised to pay a particular price, made a deposit, and the developer was able to get construction loans based on selling 70%+ (preselling) of units.

          It sometimes happens that the market begins to correct, but because the developer must still deliver what has already been paid for, construction jobs will remain for a while. If there is an extreme correction or major economic crisis, sometimes that is enough to stop construction that is already underway, but it would take a lot more than what we’re seeing thus far. When we vacationed in Greece, we saw concrete skeleton structures that were abandoned.

          • tim 7 years ago

            The 3 towers that are just going to break ground here weren’t even owned by the developer 2 years ago. Sales have only taken place in the last 6 months

            Still waiting on this “flat” data for Victoria to back up your claims. My data shows nothing that you claim. Things might be slow back east, but that’s not the case here

            I see prices up another 15% here by next year, which is on top of the 30% recent yearly increase. Victoria was even featured in the Wall St Journal for its red hot real estate market

          • bb 7 years ago

            I don’t know about Victoria. I live in Toronto. You may think that sales occurred only 6 months ago, but there may have been a lot of offshore buying and marketing going on prior to that. Developers have been selling directly in Hong Kong and Chinese Cities. Chinese capital controls strengthened at the beginning of this year, so that may have contributed to the slowing of sales.

            Also, in B.C. aren’t there new first-time buyer incentives that may be giving the condo market a boost? Perhaps that explains it too.

  • Max 7 years ago

    Housing Price Index is using Benchmarking Methodology which is more accurate than TREB average sold data which may vary time to time even in a single neighborhood depending on the type of properties being sold. I came across a website (www.hiva.ca) that uses both HPI and TREB in its reports. It covers GTA though.

  • Alistair McLaughlin 7 years ago

    Also important to note: Teranet uses land registry data, so there will always be a lag effect before any price movements show up in the Teranet index. Registration doesn’t happen until after a deal closes, which is often months after the initial sale. This means that the Teranet index lags the various real estate boards’ MLS stats and CREA’s numbers by several months.

    Due to it being a paired sales index, and also because it uses land registry data, Teranet is almost certainly the more accurate historical measure of home resale prices over time. However, the “stale dated” nature of the data it uses means it should not be used to gauge current market health.

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