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At the conclusion of 2021, Canadian home prices grew more than 15 per cent annually, beating out the previous market peak that was established around five years ago.
According to monthly market reports released this week for the Teranet–National Bank National Composite House Price Index (HPI), the December composite index was up 15.5 per cent year-over-year. This breaks the previous peak that was achieved in 2016 before “macroprudential measures were imposed to calm the housing market.”
Of the 11 cities the composite index analyzes, growth was driven by yearly prices increases in Halifax (30.7 per cent), Hamilton (25.4 per cent), Victoria (19.7 per cent), Toronto (16.8 per cent), Ottawa-Gatineau (16.3 per cent) and Montreal (15.6 per cent). Four of the cities — Halifax, Hamilton, Montreal and Victoria — reported all-time high price growth between December 2020 and December 2021.
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Although their annual price increases were not record-breaking in December, value growth in Toronto, Ottawa-Gatineau, Vancouver, Quebec City and Winnipeg was still “very strong on a historical basis.” Meanwhile, Calgary and Edmonton recorded their best gains since 2014.
The Teranet–National Bank HPI is an independent representation of changes to Canadian single-family home prices by the National Bank of Canada and Teranet Inc. The HPI is determined by tracking the observed or registered home prices over time using data from property records of public land registries. The calculations use the repeat sales method, which weighs the price increase observed between two sales of the same property.
On a monthly basis, the December composite index reported a seasonally-adjusted monthly increase of 1.1 per cent, higher than the 0.6 per cent increase seen in November. With no seasonal adjustment, the index rose 0.8 per cent from November to December, the second consecutive monthly increase.
Without seasonal adjustment, eight of the 11 markets drove monthly price growth, including Victoria (2.1 per cent), Halifax (1.9 per cent), Hamilton (1.2 per cent) and Montréal (1.1 per cent). Winnipeg, Ottawa-Gatineau and Edmonton reported price drops ranging from 0.1 per cent to 0.4 per cent. After seasonal adjustment, nine of the 11 markets in the composite index increased month-to-month, including Victoria (2.2 per cent), Hamilton (1.7 per cent), Quebec City (1.5 per cent), Montreal (1.3 per cent), Toronto (1.2 per cent) and Vancouver (1.1 per cent).
The monthly price increases should be “viewed in conjunction” with the strength in the resale housing market, according to National Bank economist Daren King.
“Indeed, over the past five months, sales have increased and the inventory of properties for sale has remained very low, explaining the recent acceleration in prices. Given that the inventory of properties for sale is at an all-time low, it would not be surprising to see further increases in home prices in the coming months,” wrote King.
“However, the recent increase in mortgage rates and the increase we expect in 2022 should eventually dampen this appreciation,” he added.
In a separate report regarding the composite index, King noted that in light of recent mortgage interest rate increases and the expected increases to come, some people who have “secured advantageous interest rates” have likely brought forward transactions. This would explain the strength of the last few months.