The pandemic era in Canada saw a thirty percent increase in housing prices that were already high as a result of a decade of low interest rates and rising demand due to population growth. However, a combination of rising interest rates led by the Bank of Canada in an effort to curb inflation, the inevitable subsequent slowdown in the economy, as well as inflation reducing the household resources available for home purchases has meant that home prices in Canada have finally reached their peak and are on the way down. The latest Teranet-National Bank Housing Price Index Release shows that the National Composite House Price Index fell 3.1% from August to September, the largest monthly decline on
record since the index began in 1999 and exceeded the previous month’s
record decline of 2.4%. Needless to say, Ontario did not escape this trend but despite the drop, prices are still higher than they were a year ago.
Figure 1 shows that year over year (September to September), prices were up in 15 out of 16 major Ontario cities with the exception being Peterborough. The largest percentage increases year over year have been in Greater Sudbury, Kingston and Kitchener-Cambridge-Waterloo. Thunder Bay's increase over the last twelve months was just under 4 percent. However, prices are down from their peak in all of these cities as illustrated in Figure 2. Most of these cities saw their prices peak in May of 2022 with the exceptions being Belleville, Kitchener-Cambridge-Waterloo and London (peak in April 2022), Ottawa-Gatineau (peak in June 2022) and Thunder Bay (peak in July 2022).
The largest declines since peak price have been in Windsor (16.2 percent), Oshawa (16.4 percent) and Peterborough (23.2 percent). Meanwhile, the smallest declines since peak price were in Thunder Bay (5.7 percent), Greater Sudbury (6.1 percent) and Ottawa-Gatineau (8 percent). Northern Ontario cities like Thunder Bay and sudbiury are not immune from national or provincial trends but they have historically not been as subject to the same fluctuations as other cities. In Thunder Bay for example , the housing price boom while substantial relative to its historic prices was nevertheless more muted than the GTA. The downturn will likely be similar. It is probably no coincidence that to date the price drop in Thunder Bay, Sudbury and Ottawa-Gatineau has been the least of these 16 major cities as all three of these cities have an economic base of broader public sector employment at 30 percent of jobs or more (in the case of Ottawa- Gatineau) which provides a substantial economic stabilizer when the national average in closer to 20 percent.
Given that interest rates are expected to rise substantially next week as inflation really shows no signs of abating in Statistics Canada's latest release, one should see the price decline continue into the fall.
