Growth in Canadian new home prices slows in December

Thu Feb 9, 2012 10:07am EST
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By Louise Egan

OTTAWA (Reuters) - The pace of growth in new home prices in Canada slowed in December to 0.1 percent compared with 0.3 percent in November, Statistics Canada said on Thursday, in another sign the hot housing market may be cooling.

Markets had expected a 0.2 percent price gain in the month, according to the median forecast in a Reuters survey.

Compared with a year earlier, the new housing price index rose 2.5 percent in December, the same rate as in the previous two months.

Strong demand for housing helped propel Canada's economy to quick recovery following a 2008 recession. But continued high prices and heavy borrowing amid rock-bottom mortgage rates has policymakers worried about overheating.

They fear eventual interest rate hikes and a decline in prices could push many consumers into bankruptcy.

Bank of Canada Senior Deputy Governor Tiff Macklem said this week the central bank remains concerned about high household debt levels, which are approaching levels seen in the United States before the 2008-09 crash, although he noted there had been some slowing in credit growth.

The central bank cites household debt as the biggest home-grown threat to the financial system.

Still, almost nobody is predicting a U.S.-style meltdown and recent data suggest a soft landing for the housing market.   Continued...