TORONTO (Reuters) - Existing homes sales rose only slightly in Canada last month, while the average sale price declined, offering further evidence the once hot market is cooling under pressure from a slowing economy, tighter mortgage rules and anxiety about global financial troubles.
The Canadian Real Estate Association (CREA) said 39,740 homes changed hands in December, up 1.8 percent from a month earlier, using seasonally adjusted calculations. The number of listings rose 3 percent from November.
Actual sales rose 4.6 percent from December 2010.
The average sale price was C$358,480 ($349,900), down 0.9 percent from November on a seasonally adjusted basis.
The industry group said the actual average house price in December rose just 0.9 percent from a year earlier, the smallest increase since October, 2010.
“Activity and prices decelerated over the second half of 2011 due to tighter mortgage regulations and the exhaustion of pent-up demand,” Mazen Issa, a strategist with TD Securities, said in a note to clients.
“Heading forward, we expect these factors along with stretched balance sheets, damaged confidence and uncertainty with respect to events in the global economy to weigh on the market for existing homes.”
The report follows data earlier this month that showed Canadian housing starts climbed more than expected in December, fueled by low mortgage rates and a boom in condo construction, even as analysts predicted the once-hot sector would cool further in 2012.
The report on Monday showed momentum remains positive but is slowing, Gregory Klump, CREA’s chief economist said in a statement.
“High-end home sales seem unlikely to spike again in the first quarter like they did at the beginning of 2011, so national average price momentum may wane further over the next few months,” he said.
Canada’s housing sector, which did not experience the subprime mortgage boom and bust seen in the United States, played a key role in lifting the economy out of recession as ultra-low interest rates drove sales and prices higher.
The Bank of Canada is seen as all but certain to keep its low-rate policy on hold at its scheduled announcement on Tuesday. Many forecasters do not think it will tighten until 2013. The central bank’s main policy rate has been at just 1 percent since September 2010. <CA/POLL>
Borrowing costs fell further this month when Bank of Montreal (BMO.TO) and other major lenders cut five-year fixed-rate mortgages to a historic low of 2.99 percent.
Canadian policymakers have voiced fears the market’s post-recession boom, combined with a long run of low lending rates, could create an asset bubble.
Analysts said the latest data could calm those fears.
“Debt-heavy households are expected to curb their appetite for mortgages, pointing to some further moderation in housing in 2012. We look for both sales and prices to be roughly flat this year. That could be just what the policy doctor ordered, allowing incomes to catch up to higher prices,” Douglas Porter, deputy chief economist at BMO Capital Markets, said in a research note.
CREA said sales totaled more than 456,000 last year, up 2.2 per cent from 2010. The average price rose a much stronger 7.2 percent.
Editing by Rob Wilson