As a result of rising interest rates curbing the ardor of buyers, residential property prices in Canada fell again in October, for a fifth consecutive month, according to new data. And the fall in prices could well continue to exceed that observed during the 2008 financial crisis, according to the National Bank.
Another sign of housing market cooling: The Teranet–National Bank Composite Home Price Index, which covers eleven major Canadian cities, fell (unadjusted for seasonality) by 0.8% from September to October — a decline, however lower than the previous month’s 3.1% drop, which was the largest monthly decline since the index began in 1999.
This weakening of the market was reflected in several large Canadian cities: with non-seasonally adjusted price drops, between September and October, reaching 1.8% in Ottawa–Gatineau, 1.5% in Montreal, 1.2% in Quebec , 0.9% in Toronto and 0.1% in Vancouver.
A bigger fall than in 2008?
Nationally, the index has contracted 7.7% since peaking in May. By way of comparison, during the 2008 financial crisis, prices only fell 6% over the same period and 9.2% in total over eight months, notes the National Bank economist, Daren King.
“In a context where monetary policy will continue to be tightened in the coming months, house prices should continue to contract and exceed that experienced during the 2008 crisis,” he writes.
National Bank expects a record cumulative drop in property prices of about 15% across the country by the end of 2023, if the key rate caps around 4% and the Bank of Canada “throws ballast by lowering rates in the second half of 2023”.
Despite this drop, the Canadian property price index remained 4.9% higher in October than it was a year earlier at the same time. In fact, after peaking in May, the nationwide price index is roughly back to where it was around January and February 2022.
In total, since the start of the pandemic, property prices have appreciated by about 28% in Canada, according to unadjusted data from the index. At the city level, it increased by 39.5% in Montreal, 27.1% in Toronto, 23.8% in Quebec City and 22.5% in Vancouver.
Prices go down, but sales go up
While prices are down, sales of residential properties rose 1.3% from September to October, according to the National Bank tally — the first monthly increase in eight months.
“Despite this growth in sales, this should not be seen as the beginning of an upward trend, but rather a stabilization of the market,” said Mr. King.
“With the rate hike expected by the Bank of Canada in December, the resale market could even see further declines in the coming months and remains at a level of activity well below its historical average,” said the economist. .