In Canada, the Teranet–National Bank House Price Index™ (HPI) is used to follow the rate of change of repeat sales and refinancing of Canadian single-family home prices.

November 2019 Housing Price Index

In November, the Teranet–National Bank House Price Index™ rose 0.2 per cent from October. Considering that seven of the last 10 Novembers showed declines, this is not so bad. Although traditionally the fourth quarter tends to show declines because it is seasonally slow, the seasonally adjusted index would make November the fourth consecutive period monthly increase.

  • Declines of the indexes in Halifax (−1.3 per cent) and Winnipeg (−0.6 per cent) slowed the composite index while in Toronto, Victoria and Ottawa-Gatineau indexes were flat.
  • Increases were seen in Edmonton (0.1 per cent), Calgary (0.2 per cent), Montreal (0.3 per cent), Vancouver (0.4 per cent), Hamilton (0.4 per cent), and Quebec City (1.0 per cent).
  • It was the second consecutive gain in Vancouver, which comes on the heels of a run of 15 months without an increase. Home sales are recovering in Vancouver following a March bottom to the average volume of the last decade.
  • Toronto is under its September peak, which coincides with a plateauing of home sales. This is not overly worrisome since the Toronto market is balanced.
  • It was Montreal that proved to be the most sustained performer, with an index that increased in 17 of the last 20 months.
  • The cumulative gain in Montreal however of 11.0 per cent in the same period is topped by Ottawa’s 15.4 per cent.

Over the past seven months, the composite index has been strengthening. This follows weakness in the eight previous months which reflected a cumulative gain of just 1.4 per cent from November 2018 to November 2019 amounting to a fourth consecutive acceleration.

This gain, however, was braked by Vancouver (-5.2 per cent), Edmonton (−2.7 per cent) and Calgary (−0.9 per cent). Compared to the previous year, marginal increases were seen in:

  • Winnipeg (0.2 per cent)
  • Victoria (0.7 per cent)
  • Quebec City (0.9 per cent)

The increase is even more apparent in:

  • Toronto (4.2 per cent)
  • Hamilton (5.0 per cent)
  • Montréal (6.4 per cent)
  • Halifax (6.8 per cent)
  • Ottawa-Gatineau (8.1 per cent)

When looking at seven urban areas of Ontario’s Golden Horseshoe, the indexes are similar to Toronto and Hamilton. Recoveries started in the second quarter, following a weak start to the year.

Gains were seen across all seven areas compared to the previous year with:

  • Oshawa up 2.9 per cent
  • Barrie up 3.2 per cent
  • Peterborough up 7.0 per cent
  • Kitchener up 7.4 per cent
  • Catharines up 7.6 per cent
  • Guelph up 8.0 per cent
  • Brantford up 8.2 per cent

In British Columbia, Abbotsford-Mission’s index has been reviving for three months with a 12 month retreat of 1.7 per cent. This is a good sign following nine months of struggle. Meanwhile in Kelowna recovery has run an eight-month streak up 3.4 per cent from 2019.

In Ontario, the strongest indexes were in:

Windsor (+9.4 per cent) and London (+9.4 per cent) with strong performance over the entire year. Other gains were seen in Thunder Bay, up 4.4 per cent, Kingston up 7.4 per cent and Sudbury up 4.8 per cent.

Looking Toward 2020

Based on the November national housing price index increase the numbers are consistent with the recovery of home sales. According to CREA forecasts, sales should continue to improve in 2020 at a slower pace than we saw last summer with forecasts looking at an increase of 8.9 per cent for national home prices with about 530,000 units sold.

However, it is important to keep in mind the increase will be more about the weak start to 2019 sales as opposed to improved performance in general. The main provinces expected to contribute to the sales increase include British Columbia, Ontario, Quebec and Alberta.

When it comes to average home prices, a 6.2 per cent increase is expected to $531,000 in Canada, not far off from 2019. However, Alberta, Saskatchewan and Newfoundland and Labrador are more likely to see declines, while Ontario, Quebec and the Maritimes are likely to see more gains.

What will make a consistent story in Toronto and Vancouver is a growing issue with inventory with supply shortages potentially forcing further price gains due to a more competitive market. This could once again have these cities seeing an acute issue with skyrocketing prices.

Housing Affordability Composite Index (HACI)

All markets saw a return to historical averages in Canada housing prices Q3 2019 with the decline in mortgage rates in hand with a booming labour market. Income in Canada increased 5.1 per cent annualized over that period with very little change in national home prices. Canada’s national housing affordability composite index lines up with its historical average, but this is not a sign everything has normalized in all metropolitan areas. Unfortunately, things remain difficult in Toronto despite both condo and non-condo affordability improvements since Q4 2018.

Affordability remains above respective historical averages in Toronto. Vancouver monthly mortgage payment as a percentage of income is down to Q1 2016 levels thanks to a cumulative decline of home prices. However, while the condo market is back to its historical average in Vancouver, the non-condo segment is still seeing higher pricing. Improvements will be limited for home affordability with the challenges presented by population growth in Canada’s metropolitan areas and leveling mortgage rates.

If you would like a clear explanation about how the housing price index can affect your home sale or purchase, speak to a real estate professional.

In Canada, the Teranet–National Bank House Price Index™ is used to follow the rate of change of Canadian single-family home prices. The index measures changes in single-family home prices based on the market, providing a clear picture of home values across Canada.

It provides a valuable tool to track increases and decreases in housing markets, while also making it easier to estimate prices more accurately. You can use HPIs to decide if you can realistically afford a home in your city or area of preference with 11 monthly indexes covering residential houses in the metropolitan areas of Canada.

What Areas Does the Housing Price Index Cover?

The Canadian metropolitan areas covered by the Teranet–National Bank House Price Index™ are:

  • Victoria
  • Vancouver
  • Calgary
  • Edmonton
  • Winnipeg
  • Hamilton
  • Toronto
  • Ottawa
  • Montréal
  • Québec
  • Halifax

The numbers provide a trusted tool to measure changes over time and trends based on a neighbourhood or region. Real estate experts can track when the market is reaching an all time high or low allowing them to better understand patterns as well as make calls on fair market value.

Housing Price Index Methodology

The housing price index is estimated using the observed or registered home prices tracked. To be included in the index the home must have experienced at least two sales. This “sales pair” allows for the measurement of increases or decreases in property value.

Homes with the following factors will not be considered in the calculations:

  • Non-arms-length sales
  • Change of type of property such as renovated homes
  • Data error
  • High turnover frequency

This methodology averages price appreciation from different pairs of sales, separating each pair for observation during the estimation process.