UPDATE 1-Canada house prices rise in January to record high

Wed Feb 12, 2014 9:57am EST
 
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By Andrea Hopkins

TORONTO Feb 12 (Reuters) - Canadian home prices rose to a record high in January as Vancouver prices surged, the Teranet-National Bank Composite House Price Index showed on Wednesday, even as other housing indicators have shown a cooling market.

The index, which measures price changes for repeat sales of single-family homes, showed national prices rose 0.4 percent last month from December, the largest monthly rise in five months. They had risen 0.1 percent in December.

Canada's housing market had roared back to life through much of 2013 after a 2012 slowdown, but was showing signs of cooling in the final months of last year, and economists have been calling for a soft landing as construction and demand slow and price gains decelerate.

The Teranet data showed prices were up 4.5 percent from a year earlier, an acceleration from December's 3.8 percent price gain. The index does not show actual prices.

"Despite the uptick in home prices, we maintain the view that prices will soften," Mazen Issa, senior Canada macro strategist at TD Securities, said in a research note.

"Very favorable financial conditions are expected to erode as continued tapering by the Federal Reserve and a more robust growth backdrop lead to higher mortgage rates."

In October, the Bank of Canada dropped its policy tightening bias, increasing expectations that official interest rates will remain at historically low levels for longer than had been thought. Still, mortgage rates are expected to rise gradually as the Fed scales back its stimulative measures and financial conditions gradually tighten around the world.   Continued...