Lower borrowing costs and a growing labour force are stoking the national housing market, with Canadian home prices going up for the first time in nine months, according to Teranet data.
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.
Increases were observed in nine out of 11 metropolitan markets analyzed. Hamilton was the winner with its 2.2% price growth, a trend that National Bank of Canada senior economist Marc Pinsonneault attributed to the strength of the market’s steel industry.
The record-low 5.6% unemployment rate reached in May is also boosting Canadians’ purchasing power. According to Statistics Canada, the national workforce saw 27,700 new posts being filled, representing 2.4% annual growth and bringing the 12-month total employment gain to 453,100.
Still, Pinsonneault cautioned that the May price increase was the lowest for the month in 21 years, and that the annual gain of 0.7% was the weakest since November 2009.
Last month, Bank of Canada governor Stephen Poloz said that increases to the benchmark interest rate will likely take place once the economy enjoys sustained stability. However, it’s still uncertain as to exactly when and by how much.
Poloz has 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.”
“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,” Poloz added. “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.”