WRAPUP 1-Toronto, Vancouver drive Canadian home prices higher in April

Thu May 12, 2016 10:54am EDT
 
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By Leah Schnurr

OTTAWA May 12 (Reuters) - Canadian home prices rose in April, but the fragmented nature of the market was evident as the major cities of Toronto and Vancouver continued to accelerate, while oil-sensitive regions struggled.

National home prices rose 1.2 percent last month from March, the Teranet-National Bank Composite House Price Index showed on Thursday. The index measures price changes for repeat sales of single-family homes.

It was the largest increase for the month of April since 2008, just before the global financial crisis hit. Compared to a year ago, prices shot up 8.1 percent.

On a monthly basis, prices in Vancouver jumped 2.2 percent, while those in Toronto rose 1.4 percent. Vancouver's prices have risen by more than 2 percent each month since February.

Canada's housing market has been robust in the years since the financial crisis, partly due to low interest rates. The sector has become more segmented in the past year, with the collapse in oil prices hurting commodity-linked regions even as prices in Toronto and Vancouver accelerated.

The unchecked gains have raised concerns homeowners are overextending themselves and could find their debt burdens too much to bear when interest rates eventually rise. Overseas buying is also thought to be lifting prices, particularly in Vancouver.

"The growing bubbles in Vancouver and Toronto continue to defy economic fundamentals," David Madani, senior Canada economist at Capital Economics, wrote in a note.

"It's possible these bubbles will defy gravity until long-term interest rates begin to rebound, but there is a growing possibility they will simply collapse under their own weight."   Continued...