Teranet index shows Canadian home prices cooling

Wed Apr 25, 2012 10:51am EDT
 

By Jennifer Kwan

TORONTO (Reuters) - Canadian home resale prices sagged in February from January, the Teranet-National Bank Composite House Price Index showed on Wednesday, and the pace of year-over-year growth has slowed.

The index, which measures price changes for repeat sales of single-family homes, showed prices fell 0.2 percent in February from January, in a modest cooling of what has been a hot market across much of Canada. It was the third decline in four months.

The index was up 6.1 percent in February from February 2011, but that was down from January's 6.5 percent year-on-year rise.

"Today's print is consistent with our theme of modest cooling in the housing market in 2012," Andrew Kelvin, senior fixed income strategist at TD Securities, said in a research note. "In the very near-term, we expect that the low interest rate environment should lend support to housing in general."

But TD expects interest rates to start rising in September, and Kelvin said higher rates could reinforce the cooling in the housing market.

The frothy housing market, and rising debt levels to finance home purchases, are two of the biggest concerns for Canadian policymakers as the domestic economy recovers from recession. Higher interest rates will add to debt servicing costs, with a knock-on effect on spending across the economy.

The Teranet index showed prices were down from the previous month in six of the 11 metropolitan markets surveyed.

Victoria saw a 1.1 percent drop, while Vancouver slipped 0.3 percent. Edmonton dipped 1 percent and Calgary prices retreated 0.6 percent.   Continued...