Resale house prices increased in July, but weakness showing in Toronto, Teranet says

Canadian home prices rose two per cent in July from the month before, driven by the strongest real estate markets, but homes other than condos saw their sale prices decrease, according to the Teranet-National Bank House Price Index.

Prices overall were up 14.2 per cent from a year ago, the same as the 12-month gain recordedin June, but the month-to-month increase in July fell from 2.6 per cent in June to 2 per cent in July.

The unsmoothed subindex for homes other than condos in Toronto declined 1.6 per cent last month, Teranet's report released on Monday said. That number was mostly fordetached and semi-detached homes and row houses.

National Bank economist Marc Pinsonneaultwrote in the report on metropolitanindices that the recent "loosening of theToronto home resale market was clearly felt" in thissubindex. Analysts credit Ontario's introduction of a package of measures in April, including a foreign buyers tax, aimed atcooling the Greater Toronto Area's housing maket.

"Based on a survey of real estate boards that we conducted earlier this month, home sales declined on a [year-on-year] basis in July in most large Canadian cities west of Ottawa," Pinsonneault said. "If that trend persists, home price growth might decelerate in these regions."

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Pinsonneault said both buyers and sellers in Toronto have recently sensed a risk ofprices softening, due to Ontario's Fair Housing Plan and increases in mortgage rates. As a result, he says more buyers have remained on the sidelines while more sellers have put their homes on the market.

"It's more balanced now," he told CBC News.

The Vancouver and Victoria resale markets, meanwhile, are still rebounding on a monthly basis from a cooling period seen in late 2016, brought on the last year's introduction of a foreign buyers tax in BritishColumbia. Both cities saw prices rise 2.8 per cent in July, compared to increases of 2.5 per cent for Vancouver and 2.2 per cent for Victoria recorded in June.

Among other markets included in the national composite, monthly index increases for July were as follows:

• Hamilton (2.1 per cent),
• Ottawa-Gatineau (2.0 per cent)
• and Montreal (1.6 per cent).

The index for each of these markets reached an all-time high, the report released on Monday said.

Monthly increases were close to the norm in Winnipeg (0.7 per cent), Edmonton (0.6 per cent), Calgary (0.4 per centand Quebec City (0.4 per cent). The Halifax index was down 1.1 per centon the month.

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Teranet'scomposite index measures changes for repeat sales of homes,tracking the observed or registered home prices over time. It takes a three-month rolling average of prices to produce its index in order to even out month-to-month fluctuations. Properties with at least two sales are required in the calculations.

No real improvementin affordabilty

"There are lags in smoothed house prices and so more data is needed, but we're now three months past full implementation of tightened rules with no evidence they've done anything material to reverse prices," Scotiabank Economics said in response to the latest Teranetreport.

"While the year-ago growth rate will cool on base effects going forward, it's the trend in month-ago rates that should be watched more closely. The data so far suggests that focusing upon a foreign buyer's tax that also sent a negative signal to domestic buyers has not materially improved affordability in no small part because it failed to address the underlying supply-side issues that many including ourselves have thought of as the more significant source of price appreciation."

Continuing increases in resale prices make new builds the "relatively more affordable option," the market analysis of the bank said.

It crunched the numbers from Teranet to show that existing repeat-sale home prices have risen by a cumulative 325 per cent since 2000, versus 179 per cent for new homes.