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Business Briefing House price inflation in Canada suddenly trails that of 36 other countries - that’s right, trails

Briefing highlights

  • Home price inflation slows
  • A Tory-Ford scene I’d love to see
  • Markets at a glance
  • HBC posts wider loss

Home price inflation slows

Home price inflation in Canada now lags that of 36 other countries.

Canada’s residential real-estate market tumbled again in a global measure of home price growth, underscoring just how quickly policy measures and rising interest costs have cooled domestic housing markets.

Canada had been easing down in the quarterly price inflation ranking by Knight Frank, but the real-estate consulting group’s latest study showed a hefty drop, to No. 37, in the second quarter from No. 15 in the first three months.

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And consider that just one year ago, Canada was at No. 4.

Knight Frank Global House Price Index, Q2 2018

Ranked by annual percentage change

Rank Country or territory 12-month change Six-month change Three-month change
1 Malta 16.90% 9.40% 3.60%
2 Hong Kong 15.90% 10.40% 5.20%
3 Latvia 13.70% 7.50% 7.50%
4 Slovenia 13.40% 8.30% 4.40%
5 Hungary 12.20% 5.60% 3.90%
6 Ireland 12.00% 4.60% 2.70%
7 Turkey 10.50% 6.10% 4.10%
8 Mexico 9.90% 6.80% 4.90%
9 Singapore 9.30% 7.70% 3.20%
10 Netherlands 8.90% 4.90% 2.00%
11 Croatia 8.50% 4.10% 0.90%
12 Bulgaria 8.20% 3.60% 1.60%
13 Czech Republic 7.70% 3.20% 2.30%
14 Colombia 7.50% 4.40% 2.30%
15 Iceland 6.90% 3.80% 0.60%
16 New Zealand 6.60% 4.50% 1.10%
17 Estonia 6.60% 2.80% 1.50%
18 Romania 6.60% 3.30% 2.10%
19 Jersey 6.50% 2.30% -3.20%
20 Luxembourg 6.30% 3.90% 2.80%
21 U.S. 6.20% 4.20% 2.80%
22 Portugal 6.10% 2.60% 1.10%
23 China (mainland) 5.70% 3.70% 2.70%
24 Taiwan 5.50% 3.20% 2.20%
25 Germany 5.30% 1.50% -0.40%
26 Lithuania 5.00% 7.70% 2.00%
27 Austria 4.90% 4.40% 0.60%
28 Japan 4.90% 4.20% 4.00%
29 Denmark 4.90% 1.70% 2.40%
30 Slovakia 4.50% 5.20% 2.50%
31 Malaysia 4.10% 0.40% 0.10%
32 South Africa 4.00% 3.20% 1.70%
33 Chile 3.40% 2.30% -1.10%
34 Indonesia 3.30% 2.20% 0.80%
35 France 3.10% 1.50% 1.10%
36 Britain 3.00% 1.40% 2.00%
37 Canada 2.90% 2.40% 2.20%
38 Spain 2.70% 1.70% 0.50%
39 Belgium 2.50% -0.50% 0.00%
40 India 2.40% 3.70% -0.80%
41 Australia 2.00% 0.30% -0.70%
42 Poland 2.00% 0.50% 0.20%
43 South Korea 2.00% 1.10% 0.40%
44 Cyprus 1.80% 0.90% 0.50%
45 Norway 1.70% 5.90% 3.90%
46 Russia 1.50% 2.30% 0.30%
47 Switzerland 1.30% -0.10% -0.20%
48 Greece 0.80% 0.70% 0.70%
49 Morocco 0.00% -1.00% -1.70%
50 Sweden 0.00% -2.00% -1.20%
51 Israel -0.20% -2.10% -0.50%
52 Finland -0.30% -0.60% 1.50%
53 Italy -0.40% -0.50% -0.10%
54 Brazil -0.70% -0.30% -0.10%
55 Saudi Arabia -1.30% -1.50% -0.80%
56 Peru -1.60% -0.20% -1.60%
57 Ukraine -4.50% 0.00% 0.70%

SOURCE: KNIGHT FRANK

Knight Frank’s rankings illustrate the success of policy makers in hosing down inflated markets such as those in the Vancouver and Toronto areas. Vancouver sales are still well down, though prices remain high, while Toronto and other regions have regained what analysts see as stability.

At the same time, other markets are rising.

“Policy measures, rising interest rates (four since July, 2017) and more stringent mortgage rules are cooling the rate of house price growth in Canada,” said Knight Frank partner Kate Everett-Allen.

“Elsewhere, we are seeing more countries register a rise in house prices (50 of the 57 this quarter, up from 44 of the 57 two years earlier), but the narrative of more moderate growth is becoming a common one across multiple markets.”

Knight Frank’s study showed Canadian home prices rising 2.9 per cent in the second quarter from a year earlier. Compare that to the 6.6-per-cent annual pace of the first quarter and, even more dramatic, the 14.2 per cent of a year earlier.

The study also showed Canada is hardly alone with slower growth. Indeed, the group’s global index rose 4.7 per cent in the quarter to mark the slowest annual pace since the third quarter of 2016.

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Fewer countries may be showing outright declines, Ms. Everett-Allen said in her report. But “where prices are rising, they are rising at a more moderate pace.

“The rising cost of finance, an uncertain political and economic climate and currency instability in some markets is likely to be tempering demand.”

Like Canada, Hong Kong, Singapore and New Zealand have adopted new measures, and Ms. Everett-Allen will be watching how those markets perform.

We learned a bit more about all this today with the release of the Teranet-National Bank home price index, which rose just 0.2 per cent in August from July, and 1.4 per cent from a year earlier. Both marked a slower pace than a month earlier, with the annual gain the lowest since November, 2009.

While many cities saw a monthly increase, Vancouver chalked up its first drop in 16 months. Prices also slipped in Calgary and Hamilton.

The annual reading showed prices down in Toronto, Hamilton, Calgary and Edmonton.

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