An important home price index that monitors Canada’s housing market surged in September, showing a strong rebound from weakness observed earlier in the summer.
The Teranet-National Bank House Price Index rose 1.1 percent in September from its August level and was up nearly seven percent over the previous year. The September gain represents the second-highest national increase for that month seen in the 22 years since the index launched.
Of the 11 local housing markets monitored within the index, Ottawa-Gatineau, Quebec City, Montreal and Hamilton saw the largest monthly home price increases, ranging from 1.9 percent to 2.3 percent. Two of the country’s biggest markets — Toronto and Vancouver — saw increases of one percent and 0.6 percent, respectively.
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 the Canadian Real Estate Association 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 added to land registries as quickly as it’s entered into the MLS systems used by real estate boards.
Commenting on the September index results, National Bank Senior Economist Marc Pinsonneault noted that, beyond the noteworthy home price gains seen in the month, there were other signals the country’s major markets are stabilizing.
“Another sign of firming markets is that for the first time since May, the number of sale pairs entering into the 11 metropolitan indexes was higher than a year earlier, and by no less than 29%,” wrote Pinsonneault.
“This development echoes the revival of home sales reported by the Canadian Real Estate Association beginning in July, recovering ground lost in the severe slowdowns of previous months due to Covid-19.”
Writing in response to the latest home price index reading, Capital Economics’ Stephen Brown said that all signs point to further price inflation through to 2022. Brown shrugged off the concerns some have voiced about the Toronto and Vancouver rental markets and condo prices, arguing that their sluggishness reflects a shift in demand, rather than overall market weakness at the national level.
“The big picture is that these apartment markets are only a small part of the entire Canadian market and any further weakness is likely to be offset by strength elsewhere,” he wrote.
Rather than a price decline or winding recovery, Brown said his firm is projecting a 12 percent increase in Canadian home prices by the end of 2022.
