NBC economist cautions that the housing market slowdown may persist

Anyone hoping for a market rebound may need to brace themselves for a longer-than-expected slowdown. According to the latest Teranet–National Bank Composite National House Price Index, home prices dipped 0.1 per cent from January to February after seasonal adjustments. And according to National Bank of Canada economist Darren King, there’s reason to believe the trend may continue.

“This decline in prices comes at a time when the resale housing market has slowed sharply in recent months, due in part to uncertainty surrounding trade tensions with the United States. ,” King writes. “Consumer confidence is in free fall and the most recent data on their willingness to make major purchases (such as a property) indicate that the slowdown could continue.”

Price drops in Canada’s most expensive markets

While national prices increased 2.9 per cent on a year-over-year basis, King highlights “notable regional differences.” The largest price declines were concentrated in Canada’s priciest markets. Victoria (-1.4 per cent), Vancouver (-0.9 per cent) and Toronto (-0.5 per cent) all saw month-over-month declines in February, and both Victoria (-0.8 per cent) and Toronto (-0.3 per cent) posted annual price drops—the only two cities in the index to do so.

In contrast, some of Canada’s most affordable markets are seeing the highest price growth. Quebec City (14 per cent) and Halifax (10 per cent) led the charge with double-digit increases over the past year. Other cities, including Calgary (7.1 per cent), Edmonton (6.6 per cent), and Winnipeg (4.4 per cent), also posted gains.

“It is interesting to note that the highest price increases have been observed in the most affordable markets in the country, while the most expensive markets are at the bottom of the list,” King says.

What’s ahead for the market?

There are a few factors keeping the market under pressure, King explains. While the Bank of Canada’s recent interest rate cuts could provide some relief, the economist warns that inflation concerns make additional rate cuts uncertain. At the same time, population growth is moderating, and the labour market is showing signs of cooling—both of which could dampen demand.

King cautions, “Unless the current trade war is resolved quickly, home prices are expected to remain under pressure, particularly in the least affordable markets.”