Housing in Canada September 2022

House prices fell 3.0% m/m in September, according to Teranet-National Bank Composite House Price Index, which followed a 2.4% decline in August.

On an annualized basis, house prices rose at a softer pace of 6.0% in September (August: +8.9% y/y), the worst performance since July 2020.

Other housing-related indicators painted a mixed picture for September, with m/m home sales and new listings declining, but housing starts skyrocketing.

Overall, the September data suggests that the Bank of Canada’s aggressive rate hikes continue to have a dampening effect on the real estate market.

Looking forward, the housing market will continue to slow down as monetary policy tightens and growth slows. This is bad for housing investment, which accounted for 8% of Canada’s GDP in 2021, and real estate-related services activities.

Regarding the housing outlook, Rishi Sondhi of TD Economics said:

“September marked a huge month for housing construction, with city new builds up 5% in the third quarter, which will boost housing investment and overall economic growth. […]. [However,] we doubt that this sustained pace can be sustained given declining sales and rising interest rates, although some compensation must be provided by sustained population growth. Overall, we see the trend starting to decline but remain at a healthy level until 2023.

FocusEconomics Consensus Forecast participants expect 251,000 housing units to be commissioned in 2022 and 212,000 units in 2023.