Canadian home prices in December were down 0.6% from a year earlier, according to the Teranet–National Bank National Composite House Price Index™. As the chart below shows, this reading extends and deepens the home-price disinflation that began a year ago. It confirms that by year end, after more than five years of seller’s-market conditions, Canadian housing as a whole had become a buyer’s market. Moreover, December was the fourth straight month in which the composite index declined, extending the first run of consecutive monthly declines since March 2007.
Within the Canadian composite picture, conditions varied widely from region to region. The indices for three of the six cities in the composite index were down from a year earlier. Vancouver (−1.5%) and Toronto (−0.6%) showed 12-month deflation for the first time, joining Calgary (−7.6%), where 12-month deflation prevailed throughout the second half of 2008. Meanwhile, December prices were up from a year earlier in Montreal (5.4%), Halifax (4.6%) and Ottawa (4.2%).
In every region, however, the more recent trend is downward. For the first time since the six-city index was launched in February 1999, prices in all six cities were down from the previous month. For Calgary and Vancouver, December was the sixth consecutive month of decline, for Toronto the fourth, for Montreal the third, for Ottawa the second. The Halifax index has been down from the previous month in four of the last six months, though only two of the declines were consecutive. The Calgary index has shown monthly declines in 13 of the last 16 months, since it also declined in each of the seven months from September 2007 through March 2008.
The Teranet–National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; a complete description of the method is given at http://www.housepriceindex.ca/
The Teranet–National Bank House Price Index™ is an independently developed representation of average home price changes in six metropolitan areas: Ottawa, Toronto, Calgary, Vancouver, Montreal and Halifax. The national composite index is the weighted average of the six metropolitan areas. The weights are based on aggregate value of dwellings as retrieved from the 2006 Statistics Canada Census. According to that census1, the aggregate value of occupied dwellings in the metropolitan areas covered by the indices was $1.168 trillion, or 53% of the Canadian aggregate value of $2.207 trillion. All indices have a base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005.
By: Marc Pinsonneault, Senior Economist Economic & Strategy Team, National Bank Financial Group
Teranet - National Bank House Price Index™ thanks the author for his special collaboration on this report.