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MNI INTERVIEW: Canada Adding Home Resale Price Data to CPI
Canada will soon incorporate home resale data into its Consumer Price Index from StatsCan's Residential Property Price Index, a government economist told MNI, referring to a recently-created survey of residential prices currently increasing at more than an annual 10%.
The resale price data will be added to the CPI's MICI index of mortgage interest costs, which has a 3.57% weight in the CPI basket, Andrew Barclay, an economist at Statistics Canada's consumer prices division, said in a phone interview. He declined to say whether the change would tend to push inflation higher.
Developed after the IMF called for more global housing data following the 2008 financial crisis, the Residential Property Price Index tracks six major cities each quarter starting from 2017 and climbed to 113.5 in the fourth quarter from 102.7 a year earlier. In comparison, Canadian Real Estate Association data showed average resale prices nationwide jumped 23% in January from a year ago, the fastest since 1989.
The expanded data won't be used to go back and revise past CPI reports, Barclay said.
ASSET OR EXPENSE?
Accounting for housing in the consumer spending basket is difficult because the category has elements of an investable asset as well as of an ongoing expense for a property owner, he said.
"It's certainly an ongoing debate amongst the methodologists, amongst price experts," he said. "Where we tend to include it is in the home ownership replacement costs, and one component of MICI."
Bank of Canada Governor Tiff Macklem told reporters last month that while there are signs of excess returning to housing, the economy needs all the growth it can get during the pandemic. Demand has shifted from Toronto and Vancouver before the pandemic to suburban and rural properties as families seek more space, unlocking a new set of potential strains on consumer finances and banking.
"Housing is certainly a difficult issue because it's very popular with the public, and they tend to notice it a lot more than other things, so it's certainly something that we try to take account of," Barclay said.
The agency announced other details of the CPI change in last month's inflation report, and is due to provide more information in its next inflation report on March 17.
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