Photo: James Bombales
Despite reports of a weakening market, the Toronto metro area posted a strong annual house price gain in July, according to the latest Teranet-National Bank House Price Index.
Published today, the index, which tracks prices for homes that have been sold at least twice, showed a price increase of nearly 28 per cent year-over-year in the Toronto market. A strong 2.1 per cent increase over the June index level was also observed in the hot market, which brought the Toronto index to its highest reading on record.
In a media release accompanying the data, National Bank Senior Economist Marc Pinsonneault pointed out that while the gain “looks strong given the current context in the GTA” there’s a noteworthy weakening in one segment of the Toronto index.
The context Pinsonneault refers to is a “loosening” in the Toronto resale market, which saw a steep 40.4 per cent decline in home sales in July paired with a 5.1 per cent increase in new listings. This is a continuation of a trend that began following the Ontario government’s introduction of its Fair Housing Plan in April of this year, which included a foreign buyer tax for the Greater Golden Horseshoe and province-wide changes to rent control, among other measures.
The weakening that the National Bank economist describes is happening in the “unsmoothed” sub-index tracking “dwellings other than condos,” which Pinsonneault says was down 1.6 per cent from June to July. In a follow-up email to BuzzBuzzNews, the economist says that dwellings included in this index will primarily be detached, semi-detached and rowhouses. To create its official index, Teranet-National Bank use a three-month moving average of the raw monthly indices in order to smooth out monthly fluctuations. The “unsmoothed” sub-index that Pinsonneault is referencing looks instead at the change between the raw monthly indices for June and July.
“This abrupt trend reversal in the index of Toronto’s least affordable type of dwelling is consistent with the recent loosening reported in the home resale market,” says Pinsonneault, in the media release.
Despite this shift that Pinsonneault points to, month-over-month growth observed by the Teranet-National Bank index remains strong relative to the MLS Home Price Index Composite Benchmark, published at the beginning of each month by the Toronto Real Estate Board (TREB). From June to July, the MLS index fell 4.6 per cent, according to the latest reading from TREB published August 3rd.
But as Pinsonneault acknowledged in a July interview with BuzzBuzzNews, the Teranet-National Bank index could lag behind the MLS as a result of differences in how the data used for the respective indices is obtained.
“Look at the fact that the Teranet-National Bank data comes from a land registry, and so transactions are recorded in the land registry about one or two months after the sale is recorded in the (multiple-listing-service) system,” says Pinsonneault.
“When you have a sudden shift in price trends, it’s plausible that the Teranet-National Bank index will be lagged with the MLS [Home Price Index].”
Pinsonneault also addressed the impact that Toronto’s monthly index price increase had on the national composite, which tracks 11 of Canada’s largest housing markets. The economist described the two per cent increase observed on the national level as being “significantly driven” by the rise in the nation’s largest city.
The national composite index also hit an all-time high in July, as did the metropolitan area indices for Vancouver, Victoria, Hamilton, Montreal and Ottawa-Gatineau.