A Canadian home price tracker known to be one of the best measures of price appreciation just experienced a record-breaking November increase.
The Teranet-National Bank House Price Index rose 0.9 percent last month over October’s reading, the strongest gain for the month of November in the 22 years that the index has been compiled.
National Bank Senior Economist Marc Pinsonneault said it was the second month in a row that the index had broken a record for a monthly increase at the national level. Hamilton, Halifax, Montreal, Ottawa-Gatineau, Victoria and Vancouver all posted monthly increases of over one percent. Toronto missed the one percent mark, but still recorded a “highly respectable” 0.8 percent rise, according to the economist.
From an annual perspective, the national index rose nine percent over November 2019, the highest 12-month increase since early 2018. Ottawa-Gatineau, Halifax, Hamilton and Montreal led the way by this measure, all recording annual increases above or near 15 percent.
The Teranet-National Bank 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 (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 added to land registries as quickly as it’s entered into the MLS systems used by real estate boards.
“The strong rise of prices is consistent with the revival of home sales volume over the last several months reported by the Canadian Real Estate Association. For a third straight month, the number of sale pairs entering into the 11 metropolitan indexes was higher than a year earlier,” wrote Pinsonneault.
In new commentary on the Teranet-National Bank November price figures, Capital Economics’ Stephen Brown said Canadian home price inflation is forecast to rise above 10 percent annually in the first few months of 2021. It will slow following that, but is expected to continue to rise throughout the year.
“A few forecasters reiterated at the start of December that they still expect declines in house prices in 2021, seemingly because they believe the effects of high unemployment will finally be felt,” wrote Brown in commentary published this morning.
“It seems very hard to justify those downbeat views from the recent data, however, with the sales-to-new listing ratio little changed in November and still consistent with very strong house price inflation,” he continued.
The sales-to-new listing ratio is a key indicator of whether the market is in buyer’s or seller’s territory. With CREA’s latest national reading showing the ratio still in record high territory — meaning the market is undersupplied and sellers are calling the shots — continued price increases seem inevitable.
