New housing data released in two separate reports this week paints a picture of strengthening sales activity across the country, along with moderate price gains in most markets.
The MLS Home Price Index released by the Canadian Real Estate Association was up 2.1% to $634,300 this July from July 2017. This index is a more accurate way than averages to measure price progression among the 15 cities it covers.
July is the first month since April 2017 that these benchmark prices have grown year-over-year. The gains are likely due to the Greater Toronto Area rebounding from the psychological effect of the Ontario Fair Housing Plan announced in April 2017, which included 16 measures designed to cool the market.
The Teranet-National Bank National Composite House Price index, which uses data from property records of public land registries from 11 major cities, paints a similar picture of year-over-year growth. This index was up 1.8% year-over-year, a massive change from the overheated market in June 2017, when the market posted record gains of 14.2%.
Average home prices across Canada were also up year-over-year for the first time since January, rising 1% to $481,500.
When we exclude Canada’s two most expensive markets, the Greater Toronto and Greater Vancouver areas, the national home price drops to just $383,000.
The market may be picking up from 2017, but CREA data shows a decline of 0.38% from June.
Teranet paints a similar picture of month-over-month growth. By this measure, the national home price was up 0.8% from June to July, which is lower than the historical average of 1%. But when we adjust for seasonal variation, the market was flat.
New mortgage rules pushing Canadians into condos
OSFI, the federal bank regulator, is owed some responsibility for this. It tightened mortgage lending qualifications on January 1 of this year, and that has cooled down the market by making it harder for first-time homebuyers to qualify for a mortgage.
“This year’s new stress-test on mortgage applicants continues to weigh on home sales, but its effect may be starting to fade slightly in Toronto and nearby markets,” said CREA President Barb Sukkau. “The degree to which the stress-test continues to sideline homebuyers varies depending on location, housing type and price range.”
Its most prominent effect on the market in 2018 has been to drive sales of cheaper properties, like condos, and reduce activity among more expensive types, like detached houses.
Condos posted double-digit gains, up 10% year-over-year, as one-storey and two-storey single-family home prices continue to decline year-over-year by 0.7% and 1.5%, respectively. The decline, however, is smaller this July than it has been in previous months, suggesting a recovery is near.
British Columbia prices rising faster vs. Ontario
All cities in British Columbia tracked by CREA’s index posted double-digit gains year-over-year. Fraser Valley grew 13.83% this July, while the Greater Vancouver area grew 6.68%. Similarly, the Teranet House Price Index showed Vancouver gained 10.63% year-over-year.
Meanwhile in Ontario, prices are growing far more slowly. The Greater Toronto Area is down 0.59% year-over-year, according to CREA, and down 4% according to Teranet. The bright spot in the province is Ottawa, which grew 7.4% according to CREA and 5% according to Teranet.
Check out the infographic below to see price trends among more Canadian cities:
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