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Home price declines in big cities drag down Teranet-National Bank index

In December, Canada experienced a decline in home prices, as indicated by the Teranet-National Bank Composite House Price Index. This monthly index focuses on the 11 largest cities in the country, revealing a 0.5% decrease in home prices compared to the previous month.

Among the 11 cities, only four witnessed a drop in seasonally adjusted housing prices. The most significant decline occurred in Victoria, where prices plummeted by 3.9%. Vancouver, Toronto, and Ottawa-Gatineau also saw decreases of 1.5%, 0.8%, and 0.3%, respectively. The combined impact of these declines in major cities led to a third consecutive month of an overall decrease in the average housing prices, according to a press release on Thursday.

The statement accompanying the release attributed the decline in property prices to persistent affordability challenges and a less robust job market. Despite a somewhat subdued economy, the real estate market has not yet experienced a surge in additional housing supply. Looking ahead, the statement predicts a continued decline in prices, driven by ongoing challenges in the labor market, even though historical population growth and housing shortages provide some support.

Conversely, some cities experienced notable increases in home prices during the same period. Calgary saw the most significant surge with a 2.3% increase, followed by Halifax, Quebec City, and Hamilton, each witnessing hikes of 2.3%, 0.9%, and 0.9%, respectively.

On a year-over-year basis, the Teranet-National Bank Composite House Price Index rose by three percent. Halifax stood out with a remarkable 10.3% increase in housing prices over the year. Notably, only Edmonton saw a year-over-year decline in housing prices (1.6%), while Victoria remained stable.

These findings align with recent data on Toronto's housing market, which indicated a decline in prices for the month but suggested a potential rebound in the near future. The Toronto Regional Real Estate Board expressed optimism, anticipating lower borrowing costs in 2024 and a resilient economy that could lead to increased home sales.

Similarly, a report from the Real Estate Board of Greater Vancouver noted a 1.4% decrease in housing prices in December compared to November. These varying trends across Canadian cities highlight the complexity of the real estate market and the influence of local factors on housing prices. As the year progresses, factors such as borrowing costs, economic resilience, and potential changes in the labor market will continue to shape the dynamics of Canada's real estate landscape.