Canadian home prices climbed 5.2 percent in May

Fri Jun 22, 2012 12:04pm EDT
 
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By Jennifer Kwan

TORONTO (Reuters) - Canadian home prices climbed 5.2 percent in May from a year earlier, with Toronto leading all major markets with a 7.9 percent gain, an industry group said on Friday, highlighting a housing boom that has become a concern for policymakers.

The Canadian Real Estate Association (CREA) released the data a day after the federal government tightened rules for borrowers and mortgage lenders in its fourth move to cool down the country's red-hot property market. Ottawa wants to put the brakes on home buying and deflate a possible housing bubble before it pops.

The rise in the home price index for May was the same as April's year-on-year gain.

In Toronto, Canada's largest city, prices jumped 7.9 percent from a year earlier. Prices rose 4.8 percent in Calgary, 3.3 percent in Vancouver, and 2.2 percent in Montreal.

"If the government needed further validation to tighten its mortgage rules yesterday, it has it with the May home price report," Sal Guatieri, senior economist at BMO Capital Markets, wrote in a note to clients.

"By helping to cool the market now, the rule changes should increase the odds of a soft, rather than hard, landing."

Since the 2008-09 recession, the Canadian property market has rallied on record low-borrowing costs.

"With European sovereign debt and banking issues likely to cloud the global economic outlook, Canadian interest rates will remain at or very near current levels," said Gregory Klump, CREA's chief economist.   Continued...