A closely watched Canadian home price index shot up 2.8 percent in May from the previous month, the largest monthly increase ever recorded in the history of the index.
The Teranet-National Bank Home Price Index has been tracking Canadian home price appreciation since 1999 and is widely regarded as the gold standard for monitoring the market. May’s monthly increase was the largest recorded in the index’s 22 years of reporting.
Of the 11 constituent markets that make up the index, Ottawa-Gatineau, Halifax, Hamilton and Toronto all saw monthly increases above three percent. Meantime, Vancouver, Winnipeg, Montreal and Victoria recorded monthly gains in the two percent range.
National Bank Economist Daren King wrote that the index “uptrend” would likely continue in the months ahead.
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.
All markets included in the index saw significant annual price increases as well, with Halifax, Hamilton and Ottawa-Gatineau leading the way with 20-percent-plus gains. Montreal, Victoria and Toronto all were above or matched the national average increase of 13.7 percent.
Earlier in the month, RBC Senior Economist Robert Hogue wrote that the latest home price data from CREA suggested that intense competition among homebuyers would be sustained in the coming months, leading to further home price increases.
With the Teranet-National Bank Home Price Index lagging behind CREA’s price tracking, expect more significant index price gains for much of the year.
