Canada: Home Price Inflation Eases Again In November
The National Bank of Canada | Dec 20, 2012 02:30AM ET
On a y/y basis, the Teranet–National Bank National Composite House Price IndexTM rose 3.3% in November. Over the 11 metropolitan areas covered, 12- month price changes vary widely. Five largely exceeded the national average: Halifax (+7.3%), Hamilton (+7.2%), Toronto (+6.3%), Calgary (+5.7%) and Winnipeg (+5.2%). Six were below: Montreal (2.9%), Quebec City (+2.7%), Ottawa-Gatineau (+2.2%), Edmonton (+1.6%), Vancouver (-1.4%) and Victoria (-1.7%).
On a monthly basis, the Composite index declined 0.4% in November, a third drop in a row. The index declined in 10 of the regions covered: Quebec City (-0.1%), Hamilton and Toronto (-0.3%), Montreal (-0.4%), Ottawa-Gatineau (-0.5%), Vancouver (-0.6%), Winnipeg (-0.7%), Edmonton and Victoria (-0.9%). The sole exception was Calgary where prices rose 0.4%.
OPINION: On a y/y basis, recent house price inflation in Canada has been only slightly above that in the U.S. (top chart). Expect the gap to still narrow in the months ahead given that monthly price changes in the Canadian Composite Index remain systematically lower than in the U.S. after seasonal adjustments (middle chart). This development in the Canadian Composite Index reflects the overall softness in resale market conditions in the regions covered.
In these regions, sales have declined in six of the last seven months (bottom chart), for a cumulative drop of 15%. With the weakness in sales expected to persist, home price inflation is likely to continue to trend down in Canada. If we are right, the unwinding of the real estate wealth effect will be a drag on consumer spending in the coming quarters.
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