Canada house prices climb to record 0
'For sale' sign on a house in Ottawa, Friday May 7, 2010. (QMI Agency/ERROL MCGIHON)
Canadian home prices rose in July from June to hit a record high for a third consecutive month, but the slower pace of gains and falling prices in Vancouver added to recent evidence the market is cooling.
The Teranet-National Bank Composite House Price Index released on Wednesday showed overall prices climbed 0.7 percent in July from the previous month.
The index, which measures price changes for repeat sales of single-family homes, was up 4.8 percent from a year earlier. It does not provide actual prices.
While home-resale price gains continued to outpace inflation, July was the eighth straight month in which the annual price gain decelerated.
A long run-up in Canadian house prices and low supply in some markets has sparked concern that a housing bubble is forming. The federal government has tightened mortgage lending rules four times in four years to try to prevent borrowers from taking on too much debt to buy into the market.
"Despite the string of fairly robust month-over-month gains, we do not expect this trend to continue especially as the impact of tighter mortgage regulations weigh on housing market activity over the balance of the year," Mazen Issa, Canada macro strategist at TD Securities, said in a research note.
Separately on Wednesday, Canada's government housing agency said it is not concerned that a housing bubble is forming, declaring in a second-quarter report that the market is supported by demographic and economic fundamentals.
In its report, Teranet noted further deceleration in prices is likely.
"Since prices rose 1.0 percent from July to August last year, further deceleration is possible in August 2012," it said.
The 0.7 percent monthly gain in July was the fifth rise in a row and was led by a 2.0 percent rise in prices in Hamilton, Quebec City and Victoria, and a 1.6 percent increase in Toronto. Vancouver prices dropped 0.5 percent, the first decline there in five months.
Issa said Toronto's hot housing market is helping to hold up the national average even as other cities see smaller price gains and Vancouver records a sharp slowing.
"Excluding (Toronto) would show a more pronounced decelerating trend in prices. Other cities are in a stable to declining trend in nominal house price appreciation," Issa said.
"In Vancouver, year-over-year (increases in) prices are decelerating at a fairly rapid pace and currently stand at 1.6 percent -- well below the 2011 peak of 10.4 percent registered in the month of September. "
Year-over-year data showed prices were up 9.2 percent in July in Toronto.
Six other markets lagged the national month-on-month increase. Prices rose 0.6 percent in Ottawa-Gatineau, 0.4 percent in Edmonton and Montreal, 0.3 percent in Winnipeg, 0.2 percent in Calgary and 0.1 percent in Halifax.
Halifax has had the longest run of monthly increases, with nine, followed closely by Toronto and Montreal with eight months each of rising prices.