The Canadian housing market is showing promising signs of recovery this spring, as indicated by the latest data from the Teranet-National Bank Composite House Price Index (HPI). In May, there was a notable monthly increase of 0.6 percent in home prices, marking the first upturn in the market after a prolonged period of decline spanning 11 months.
Before seasonal adjustments, the HPI experienced even more substantial growth, rising by 1.6 percent from April to May. This marked the third consecutive monthly increase, suggesting a positive trend in the housing market.
The Teranet report revealed that eight out of the 11 major Canadian Metropolitan Areas (CMAs) covered by the index witnessed an increase in house prices during May. Toronto led the way with a significant rise of 1.6 percent, followed closely by Winnipeg with a 1.5 percent increase. Other cities such as Victoria, Edmonton, Quebec City, Montreal, Hamilton, and Calgary also posted positive gains ranging from 0.1 percent to 1.3 percent. However, three CMAs experienced a decline in prices during the same period, namely Halifax (-2.6 percent), Vancouver (-1.2 percent), and Ottawa-Gatineau (-0.3 percent).
In addition to the major CMAs, the report provided insights into the performance of regional markets that are not included in the composite index. Among the twenty CMAs for which data is available, 10 recorded growth in May. Sudbury, Guelph, and Kingston stood out with significant monthly increases of 4.9 percent, 4.7 percent, and 4.6 percent, respectively. Conversely, Brantford and Sherbrooke experienced notable decreases of -8.1 percent and -4.5 percent.
When considering the year-over-year analysis, the report indicated signs of recovery in the Canadian housing market. While there was a decline of 7.6 percent from May 2022 to May 2023, this represents a smaller contraction compared to the previous month’s record drop. Calgary emerged as the top performer among the eleven cities in the composite index, demonstrating an impressive 8.3 percent increase in property prices. Edmonton and Quebec City also showed positive growth, with gains of 4.9 percent and 3.1 percent, respectively. However, some cities faced significant challenges, with Hamilton experiencing the sharpest decline at -16.8 percent year-over-year. Toronto and Ottawa-Gatineau also saw notable drops of -10.3 percent and -9.5 percent. Among the other twenty CMAs not included in the composite index, four registered annual gains, led by Saint John (7.2 percent) and Trois-Rivieres (3.9 percent), while Brantford, Peterborough, Oshawa, and Abbotsford-Mission faced the steepest declines.
Despite the positive signs of recovery, the Canadian housing market still faces challenges. Domestic housing starts are currently at their lowest level in three years, indicating that the housing shortage is unlikely to be resolved in the near future. Moreover, the recent resumption of the monetary tightening cycle by the Bank of Canada and the anticipated economic slowdown could potentially moderate price growth later this year. These factors suggest that the housing market recovery may face some headwinds in the coming months.