Home prices have increased 31% since the pandemic started, and will keep growing

Since the COVID-19 pandemic began in March 2020, Canadian home prices have experienced significant upward momentum, a trend that is expected to continue into the spring market.

According to new market reports, the Teranet–National Bank National Composite House Price Index (HPI) has increased 31.2 per cent between March 2020 and March 2022, two years since the onset of the pandemic.

Daren King, an economist with the National Bank of Canada, stated in the monthly report that household preferences for housing have changed dramatically over the past two years, a pattern that has driven market demand up and pushed available home supply down. As a result, extreme price increases have been recorded in many of the composite’s 11 census metropolitan areas (CMAs) during the pandemic. Home prices in Halifax, Hamilton and Ottawa-Gatineau have climbed at the highest rate compared to the other nine CMAs, up 65 per cent, 55.4 per cent and 39.8 per cent since March 2020.

“Judging by the current market conditions, characterized by limited supply, and continued strong demand, prices should continue to rise during the strong spring period – especially since many buyers can still get the mortgage rates that they were guaranteed before the recent increases,” said King. “However, the upward trend in prices is expected to fade in the second half of the year.”

King added that NBC expects housing demand to be less robust and for price increases to become more modest as mortgage rates rise in the coming weeks and poor affordability conditions persist.

Without seasonal adjustment, the composite HPI grew by a record 18.4 per cent year-over-year in March, an increase that matches the record growth seen in August 2021. This increase was mainly driven by Halifax, Hamilton and Victoria, where prices jumped 34.7 per cent, 28.5 per cent and 22.8 per cent from March 2021 to March 2022 before seasonal adjustment.

For the other 20 CMAs not included in the composite HPI, yearly price increases were observed in all of them, ranging from 28 per cent to 37.5 per cent.

Between February and March, the composite index rose two per cent after seasonal adjustment, the second-highest increase on record after May 2021 and higher than the 1.7 per cent increase reported in February. Before seasonal adjustment, the composite HPI was up 2.1 per cent monthly, higher than the 1.5 per cent growth observed in February.

Ten of the 11 CMAs included in the composite HPI reported monthly growth after seasonal adjustment, most notably Halifax (5.4 per cent), Hamilton (3.3 per cent), Toronto (2.7 per cent) and Ottawa-Gatineau (2.4 per cent). Quebec City was the only CMA to report a drop in prices, which were down 0.6 per cent month-to-month. For the other 20 CMAs not included in the composite index, monthly growth was observed in 19 of them.

The Teranet–National Bank HPI is an independent representation of changes to Canadian single-family home prices by the National Bank of Canada and Teranet Inc. The measurement is based on sale price data from property records of public land registries. Using repeat sales methodology, all homes that have been sold at least twice are considered in the HPI calculation, which tracks the price increase between two sales of the same property.