Canada housing prices bounce higher but no crash seen

Thu Sep 12, 2013 4:11pm EDT
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By Louise Egan

OTTAWA (Reuters) - Canadian housing prices climbed to a record high in August, according to a price index released on Thursday that suggested the property market, long the country's biggest engine of economic growth, remains strong but not frothy.

Home prices rose in August from what was already a record high in July, but the annual price increase remained subdued, the Teranet-National Bank Composite House Price Index showed.

The index, which measures price changes for repeat sales of single-family homes, showed prices rose 0.6 percent in August from a month earlier, below the seasonal norm.

Prices rose just 2.3 percent from a year earlier, a slight acceleration from July. The annualized gains for the last five months have been the smallest since November 2009, and well below the U.S. equivalent, which was up 12 percent in June.

"The demographics and the low interest rates at the moment are supportive of the market," said Marc Pinsonneault, senior economist at National Bank Financial.

Toronto and Calgary, Canada's oil capital, led the way for price hikes. But prices dropped in five of the 11 markets surveyed across the country, which Pinsonneault said was hardly evidence of overheating.

"We don't see the market having a collapse similar to the one they had in the U.S.," he said.

The housing market has been a focal point for Canadian policymakers since a boom that followed the 2008-09 recession. A prolonged period of low borrowing costs and rising house prices led to record-high household debt and rising fears of a property bubble that could pop and give way to a financial disruption.   Continued...

A builder works on the the roof of a new home under construction in the Montreal suburb of Brossard August 10, 2010. REUTERS/Shaun Best