HPI observes largest one-month drop
Housing price corrections have started to spread across several parts of the country, so much so that the June data in the MLS Home Price Index (HPI) has shown the largest one-month drop on record.
The HPI fell 1.9% last month following similar drops of 1% in April and 0.5% in May. These were first and most felt in red-hot markets like Ontario and British Columbia, but other parts of the country have started to follow suit.
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For example, the HPI fell in Winnipeg, Montreal and Quebec City from May to June. Calgary and Halifax aren’t quite there yet, but the index for both cities remained mostly flat last month.
“These developments fit our view that property values will come under increasing downward pressure across Canada over the coming months with pricier markets on the front line of that trend,” RBC Economics reported.
Other Ontario cities that experienced the most appreciation during the pandemic like London, Woodstock and Kitchener-Waterloo were also found to be the hardest-hit during this time.
Less competition has caused home resales to plummet in the vast majority of markets as well, with just a few exceptions in Quebec and parts of Atlantic Canada. Since February, home resales have diminished by 27% with a 5.6% monthly downtick in June.
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“The outsized 100 basis-point rate increase the Bank of Canada delivered on July 13 will no doubt chill the market even more in the coming months,” RBC Economics reported. “The prospects for further rate hikes – we believe our central bank will raise its policy rate to restrictive levels by the fall – will deepen the correction in both provinces, and broaden it to other parts of the country.”
Ultimately, RBC Economics has predicted that benchmark prices will drop close to 13% by early 2023, with more expensive markets surpassing 14% and affordable markets like Alberta and Saskatchewan falling under 3%.
