Canada house prices climb to record; pace of rise cools

Wed Aug 29, 2012 12:16pm EDT
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By Andrea Hopkins

TORONTO (Reuters) - Canadian home prices rose in July from June to hit a record high for a third consecutive month, but the slower pace of gains and falling prices in Vancouver added to recent evidence the market is cooling.

The Teranet-National Bank Composite House Price Index released on Wednesday showed overall prices climbed 0.7 percent in July from the previous month.

The index, which measures price changes for repeat sales of single-family homes, was up 4.8 percent from a year earlier. It does not provide actual prices.

While home-resale price gains continued to outpace inflation, July was the eighth straight month in which the annual price gain decelerated.

A long run-up in Canadian house prices and low supply in some markets has sparked concern that a housing bubble is forming. The federal government has tightened mortgage lending rules four times in four years to try to prevent borrowers from taking on too much debt to buy into the market.

"Despite the string of fairly robust month-over-month gains, we do not expect this trend to continue especially as the impact of tighter mortgage regulations weigh on housing market activity over the balance of the year," Mazen Issa, Canada macro strategist at TD Securities, said in a research note.

Separately on Wednesday, Canada's government housing agency said it is not concerned that a housing bubble is forming, declaring in a second-quarter report that the market is supported by demographic and economic fundamentals.

In its report, Teranet noted further deceleration in prices is likely.   Continued...

A house is seen for sale on the real estate market in Toronto, April 9, 2009. REUTERS/Mark Blinch