The closely monitored Teranet-National Bank Home Price Index logged a 0.3 percent increase in July, the smallest rise seen for the month in 15 years.
The national index, a composite of home prices in 11 Canadian metropolitan areas, was expected to see a slowdown in the face of the pandemic’s disruptive market effects. Published Thursday, July’s index reading confirmed this. Along with the 0.3 percent monthly increase, the index rose 5.49 percent over the previous year, also a deceleration when compared to past increases.
This reported home price cooldown stands in stark contrast to data published earlier in the month from the Canadian Real Estate Association (CREA) and local real estate boards that saw average home prices in July rise by over 14 percent year-over-year on the national level amid record-breaking sales activity.
The Teranet-National Bank House Price Index is known to lag behind other widely used home price tracking tools, including the monthly average home sale prices published by CREA and local boards.
This is because the index is compiled using a repeat sales methodology that works by tracking the price change between the two most recent sales of the same property. The index uses prices entered into public land registries in the Canadian markets it tracks. These often are slower to respond to market changes because sale price data is not entered into land registries as quickly as it’s entered into the MLS systems used by real estate boards.
National Bank Senior Economist Marc Pinsonneault said that the total number of home sales used to compile July 2020’s index declined steeply from the same period in 2019.
“The number of repeat sales entering into the July indexes was down almost 20 percent from a year earlier, reflecting the decline in home sales reported by the Canadian Real Estate Association, which is in turn attributable to physical distancing to stem the spread of Covid-19,” said Pinsonneault.
In a response to the July index data, Capital Economics’ Stephen Brown said the meager decline was a testament to how resilient the housing market has been. The economist noted that Canadian GDP saw a 40 percent annualized decline in the second quarter of the year, making a 0.3 percent monthly drop in the national index price seem paltry by comparison.
Brown said that the index would also likely turn a corner soon.
“[T]he surge in home sales to a record high last month suggests this move will soon be reversed and house prices will resume their march higher,” he wrote.
On the local level, Toronto saw a 0.3 percent index increase from the previous month and an 8 percent rise over last year’s reading. Meanwhile, Vancouver saw a slight decline over June’s reading and a 2 percent increase over July 2019.
