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After record-breaking year-over-year price gains in Vancouver last summer, home price increases eased since the BC government took action to curb runaway growth. Some have argued that the government measures haven’t been effective, citing that the market is firing up again. But, according to one economist, there is scant evidence that this is the case.

Ahead of the release of Teranet-National Bank of Canada House Price Index today, BMO Chief Economist Douglas Porter published a research note pointing out that, between September 2016 and April 2017, Vancouver’s House Price Index has barely changed.

Teranet-National Bank of Canada’s monthly HPI report observes average home price changes in 11 metropolitan areas countrywide. By tracking observed or registered home prices over a sustained period of time, the HPI can be calculated using data from land registries.

Though Porter published his note ahead of the latest index numbers, today’s release from Teranet-National Bank of Canada appears to be in line with the trend the BMO economist identified.

Last month, the national composite HPI increased by a record 2.2 per cent, the largest May gain observed in the 19-year history of the index.

All markets surveyed saw a month-over-month rise in home prices, led by three markets: Toronto, Hamilton and Victoria.

The national index price increased nearly 14 per cent from a year earlier.

Vancouver, on the other hand, saw an 8.2 per cent 12-month gain in May, well below the national average.

In recent headlines, Porter says a common thread is that Vancouver’s market is rebounding and home prices are soaring after cooling off late last year.

However, when observing the city’s monthly HPI from September 2016 to April 2017, Porter suggests that the HPI has actually remained fairly consistent over that eight-month period.

In his note, Porter points to a chart displaying the eight-month percentage change in Vancouver’s home prices before and after the tax was introduced.

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Source: BMO Economics

“It shows that in the eight full months since the tax kicked in (started in August 2016), the home price index has been almost precisely unchanged. In the eight months prior to the tax, prices had leapt 20 per cent (more than 30 per cent annualized, and the fastest in 27 years of records),” says Porter.

With home prices rising before the introduction of the tax, Porter also notes that speculation around the market easing before the implementation of the government’s levy seems unlikely.

“The chart also raises doubts about how the market was supposedly ‘already cooling before the tax began,’” says Porter.

Even though Vancouver’s overall HPI appears almost unchanged after the tax was introduced, the policy change may have had a more profound impact on home prices for some segments of the market compared to others.

Vancouver’s detached and attached year-over-year home price growth slowed to almost 7 per cent in May compared to 29.2 per cent in August 2016 (when the tax was implemented), according to National Bank Senior Economist Marc Pinsonneault’s note published today.  

However, for the condo segment the slowdown is not as apparent, with year-over-year price growth soaring roughly 18 per cent in May.

“This means that condo affordability in Vancouver could soon become as bad as it was at the beginning of 2008,” says Pinsonneault in a statement.

In 2008, almost 50 per cent of a median household income would be required to cover monthly mortgage payments, based on median home prices, according to Teranet-National Bank of Canada.

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