Canadian real estate is off to a cool start. The Teranet–National Bank of Canada House Price Index (Teranet HPI) shows a new record was set in February. The record, wasn’t a great one though – it was for price declines. Canada’s biggest markets made the largest monthly decline outside of a recession.

Teranet HPI

The Teranet HPI is a home prices index, that captures movements in home prices for resales. The index was created and run by Teranet, the country’s largest land registry operator, and National Bank of Canada. It’s kind of like the CREA HPI (benchmarks), but rely on a different data source – so they give different results. The difference is largely due to the time of measurement.

The CREA HPI only includes MLS transactions, which excludes 10-20% of transactions. It also means sales that fall through are often included in a board’s initial numbers. Teranet uses land registry data, meaning only on closed sales are included. The problem introduced is it takes time for sales to hit the registry, often interpreted as a “lag” by agents. Both have their place, and their tradeoffs. The CREA HPI is faster, and more close to market than the Teranet HPI. The Teranet HPI has more data, but considered a little slow. Both are worth taking a look at, especially in a volatile, fast-moving markets.

Canadian Real Estate Prices Make Largest February Drop Since 2009

The C11, an aggregate of Canada’s 11 largest real estate market set a new record… just not a good one. Prices across Canada fell 0.4% in February, and are 1.87% higher than last year. The market peak was reached in September 2018, and prices are down 1.43% from there. There’s a lot of gems in those numbers, so let’s unpack them.

Teranet-National Bank HPI C11 (Annual Change)

Composite aggregate of home prices in Canada’s 11 largest cities.

Source: National Bank of Canada, Teranet, Better Dwelling.

Canadian real estate prices made notable monthly and year-over-year (YOY) movements. The monthly decline is the largest for a February in the history of the index, excluding one made in 2009. The YOY increase is the third smallest outside of recession, with only July and August 2018 coming in smaller. Two records prints rarely seen outside of a recession isn’t a great start for the year.

Toronto Real Estate Is Falling Further From Peak

Toronto real estate prices fell in February, but remained higher YOY. Prices fell 0.22% in February, but remain 3.56% higher YOY. Prices peaked in July 2017, and are still 4.04% lower compared to the 3.83% gap the month before. The annual trend doesn’t sound all that bad. However, it may be less important than the fact that prices are falling further from peak.

Toronto Real Estate Prices (Teranet-National Bank HPI)

Annual percent change of real estate prices in Toronto.

Source: National Bank of Canada, Teranet, Better Dwelling.

Vancouver Real Estate Prices Make Second Largest Drop In Index

Vancouver real estate prices made the second largest drop in the C11. Prices fell 0.68% in February, and are down 1.11% from the same month last year. Peak prices were hit in July 2018, and the market is now down 3.87% from that level. The gap from peak is also getting larger in Vancouver.

Vancouver Real Estate Prices (Teranet-National Bank HPI)

Annual percent change of real estate prices in Vancouver.

Source: National Bank of Canada, Teranet, Better Dwelling.

Montreal Real Estate Prices Make Largest Monthly Gain

Montreal real estate prices bucked the trend, printing a new all-time high. Prices increased 0.36% in February, bringing them 5.15% higher than the same month last year. This is a new all-time high, making it the only market in the C11 to print a new record.

Montreal Real Estate Prices (Teranet-National Bank HPI)

Annual percent change of real estate prices in Montreal.

Source: National Bank of Canada, Teranet, Better Dwelling.

Canadian real estate markets printed the largest decline for a February, outside of a recession. Curiously, a lot of real estate data points seem to resemble those rarely seen outside of a recession.

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