Wednesday, October 28, 2009

Teranet House Price Index for August 2009


A second consecutive month of price rises in all survey markets

Canadian home prices in August were down 3.4% from their pre-correction peak of August 2008, 12 months earlier, according to the Teranet-National Bank National Composite House Price Index™. It was the eighth consecutive 12-month decline, but the 12-month decline has been diminishing steadily since it peaked at 6.9% in May. The reason is that August is the fourth straight month in which the index reading for Canada as a whole has been up from the month before. The August rise of 2.0% was particularly vigorous. It was the second month in a row in which prices were up from the month before in all six of the metropolitan markets represented in the index. This turnaround is consistent with an improvement in market conditions in the first half of 2009 - more homes have been selling and fewer have been coming on the market.

Teranet – National Bank National Composite House Price Index™

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The monthly rises in August were 2.7% in Toronto, 2.0% in Calgary, 1.7% in Vancouver, 1.5% in Ottawa, 1.2% in Montreal and 0.6% in Halifax. For Toronto it was the fourth consecutive rise of 2% or more, taking the cumulative gain to 9.4% in just four months. By way of comparison, Montreal showed a sixth consecutive rise but the cumulative six-month gain was only 4.8%.

In the three easternmost markets, Montreal, Halifax and Ottawa, August prices were above the pre-recession peak. Toronto prices are now down only 3.0% from their August 2008 peak. Vancouver prices are still down 7.7% from their June 2008 peak and Calgary's are down 12.9% from their peak of August 2007, two years earlier.

Teranet – National Bank House Price Index™

The historical data of the Teranet – National Bank House Price Index™ is available at

Metropolitan areaIndex level
August 2009
% change m/m% change y/y
Calgary152.692.0 %-8.3 %
Halifax122.840.6 %0.9 %
Montreal126.351.2 %3.6 %
Ottawa120.441.5 %2.8 %
Toronto113.822.7 %-3.0 %
Vancouver139.001.7 %-7.7 %
National Composite126.312.0 %-3.4 %

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

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.


Marc Pinsonneault
Senior Economist
Economy & Strategy team
National Bank Financial Group

Teranet - National Bank House Price Index™ thanks the author for their special collaboration on this report.

1 Value of Dwelling for the Owner-occupied Non-farm, Non-reserve Private Dwellings of Canada.

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The Teranet - National Bank House Price Index™ is an independently developed representation of the rate of change of Canadian single-family home prices. The measurements are based on the property records of public land registries. The monthly indices cover six Canadian metropolitan areas: Calgary, Halifax, Montreal, Ottawa, Toronto and Vancouver. The metropolitan areas are combined to form a Canadian composite index.

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Saturday, October 24, 2009

Rental Rates

An article in the local newspaper the Georgia Straight indicates the effects of low interest rates.
The Metro Vancouver Housing Corporation is losing many of its moderate-income tenants to the housing market.

With variable mortgage rates going as low as 2.25 percent, plus incentives being offered by sellers, families are buying homes and moving out of affordable rental properties operated by the public housing body, according to a report by regional housing manager Don Littleford.

Although this may be good news for the real-estate industry, Littleford noted in his report—to be received tomorrow (October 23) by the MVHC board—that this is a matter of “growing concern”.

"Growing concern?" For whom exactly? The public housing that is offered by MVHC is often at a very low vacancy rate. The concern is, apparently, for MVHC's profits, not so much the tenants taking on high amounts of debt, though as a good Samaritan I would be concerned for both MVHC and the tenants. What is interesting, though, is an indication that the affordable rental market is predicting trouble filling its units. To fill the units they need only drop the price by some amount to attract more applicants, which will certainly hurt their profitability to some degree. I have little doubt they are capable of filling their units to near 100% capacity, but the luxury often awarded to these professionally-run outfits is they leeway choosing their tenants at the expense of charging slightly below-market rents. This luxury may be starting to evaporate. That produces a dilemma for the PMs: take a chance and rent to a suspect tenant or leave the unit vacant. If this is the course they take, profitability can drop by more than the implied decrease in profitability due to lower market rents.

We are hearing reports of weakness in the rental market, likely because of the combination of rising unemployment (causing people to use dwellings more efficiently) and continued dwelling completions exceeding the population growth rate. Low interest rates have allowed the choice of owning to be viable for many more compared to last year -- and a great many obviously prefer to own -- but someone choosing to own instead of rent does not change the overall dwelling supply. The weakness we are witnessing in the rental market is an indication of too much supply for what the population is willing to support. That does not bode well for residential construction starts in the next while, nor are sizable rent increases likely to stick en masse. That sounds awfully deflationary to me.

Hat tip to German Guy.

Tuesday, October 06, 2009

Thursday, October 01, 2009

A Meaty Read

The Bank of Canada produces some great analysis that I read from time to time. This paper was quite interesting.

A quote:

From an aggregate perspective there are a number of reasons to think that house prices
could ináuence consumption decisions in Canada. First, residential structures and land
account for a large share of Canadian household sector wealth. Sixty eight per cent of
Canadian households own a home and for many it represents their largest asset. Second,
house price growth is associated with higher household borrowing. The positive correlation
between consumption and house prices may be related to housingís role as collateral. Between
2000 and 2007 the real price of existing homes increased by 52 per cent. At the same time,
the ratio of household debt to GDP rose dramatically from 58 per cent in 2000 to 76 percent
in 2007. By 2007 roughly 80 per cent of Canadian household debt was secured by real estate.