The housing market in Canada continues to be healthy with modest price increases, but according to the Teranet-National Bank national house price index, the rate of this increase has experienced a significant slowdown.
Released on Wednesday, October 27, the index reflected these findings across the country- a mixture of modest gains in price, compared with modest dips in price, essentially keeping prices fairly flat.
Representing the Western Markets, and bucking the trend of modest price gains, the Vancouver index showed a decline of0.4 per cent and the Calgary index was down 0.5 per cent. It was the second monthly decline in a row for Vancouver.
This balance between modest price gains and decreases is actually a healthy prop up for market prices overall. Says Shahrzad Mobasher Fard of TD Economics in a note to investors, ”If the recent trend of growth in existing home sales and decline in the supply of homes listed on the market is maintained, it should keep a floor under home prices going forward. Prospects for any acceleration in price growth is however, expected to be limited as factors such as the decelerating pace of the economy, high debt loads and weak growth in personal disposable income limit consumers' propensity to spend."According to the Teranet-National Bank national house price index, August housing prices nationally were (% change m/m y/y):Vancouver -0.4 11.8,Calgary -0.5 5.0,Toronto 0.4 12.5,Halifax 0.9 6.8, Montreal 0.5 7.7 and Ottawa 0.4 10.7. In total the National composite was 0.2 10.4.
These numbers are significant because they reflect the smallest rise in prices since the index began its consecutive climb 16 months ago. Showing the smallest year-over-year price increase in six months, prices were 10.9% higher from August 2009.
Although indications are that the rate of price growth has slowed substantially, prices in the Canadian market still are robust and healthy when compared to our neighbors to the south. In Canada, compared to the pre-recession peak, housing prices are 6.6 per cent higher. However, as yet another symptom of a market in turmoil, prices in the United States are 29% lower than their peak four years ago. This is one of many stark contrasts between the two markets.
Marc Pinsonneault, senior economist at National Bank Financial Group comments on what the market can expect to see in the near future: "Looking ahead, prices are likely to fluctuate without tendency over the next few years. At the national level, current market conditions, close to the boundary between balanced market and buyers' market, herald a deceleration in home price deflation. Also, house prices are undoubtedly high, and affordability rests on historically low mortgage rates. People will realize that rates are due to go up sooner or later. When that happens, preference for renting instead of buying should increase."
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