As a result of rising interest rates curbing the ardor of buyers, residential property prices in Canada fell once more in October, for a fifth consecutive month, according to new data. And the fall in prices might well continue, to exceed that observed during the financial crisis of 2008, according to the National Bank.
Another sign of the cooling of the real estate market: the Teranet-National Bank Composite National House Price Indexwhich covers eleven major Canadian cities, recorded an (unadjusted) decline (unadjusted for seasonality) of 0.8% from September to October — a decline, however, smaller than the 3.1% decline recorded the previous month, which represented the largest monthly decline never listed since the start of the index 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 financial crisis of 2008, prices fell by only 6% over the same period, and by 9.2% in total over eight months, notes 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 wrote.
National Bank expects a record cumulative drop in property prices of regarding 15% nationwide by the end of 2023, if the policy rate caps around 4% and if the Bank of Canada “throwing ballast by lowering rates in the second half of 2023”.
Despite this drop, the Canadian property price index was still 4.9% higher in October than it was at the same time a year earlier. In fact, following 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 regarding 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 forecast by the Bank of Canada in December, the resale market might even see further declines in the coming months and remain at a level of activity well below its historical average,” said the economist. .
