Canadian home prices went up for the first time since August 2018, with lower borrowing costs and boosted purchasing power playing significant roles in the upswing, according to Teranet data covering the month of May.
The latest edition of the Teranet-National Bank Composite House Price Index noted that prices went up by 0.5% on a month-over-month basis in May.
Growth was registered in nine out of 11 metropolitan markets analyzed. Hamilton pulled ahead of the rest of the country with its 2.2% price increase, a trend that National Bank of Canada senior economist Marc Pinsonneault pinned to the strength of the city’s steel sector.
Still, Pinsonneault warned that the May figure was the weakest price increase for the month in 21 years, and that the annual gain of 0.7% was the lowest since November 2009.
Consumer purchasing power received a significant buff in May’s record-low 5.6% unemployment rate. Statistics Canada reported that 27,700 new posts were filled during that month, representing 2.4% annual growth and bringing the 12-month total employment increase to 453,100.
Last month, Bank of Canada’s Stephen Poloz said that sustained economic stability will necessitate increases to the benchmark interest rate. However, it’s still uncertain as to exactly when and by how much.
“The natural tendency is for interest rates to still go up a bit. I don’t really know how much a bit is, and what the timing might be,” the bank governor noted. “But it depends on our forecast coming true that the slowdown is temporary and getting through all that and getting back on the track we were [on] say a year ago.”
Poloz previously attributed its hike freeze since October 2018 to global economic instabilities, along with other moderating factors like trade wars and current household debt levels.
“All of those things are kind of holding things back and the lower interest rates kind of push back and keep us at unemployment at a 40 or 50 year-low. So that’s balance,” he said at the time. “And that balance can shift when some of those headwinds dissipate.”