Canada home prices rose 1.0 pct in June from May: Teranet

Fri Jul 12, 2013 11:24am EDT
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By Andrea Hopkins

TORONTO (Reuters) - Canadian home prices rose in June from May as a seasonal uptick in sales pushed prices to an all-time high, but the annual price increase was the smallest in more than three years, the Teranet-National Bank Composite House Price Index showed on Friday.

The index, which measures price changes for repeat sales of single-family homes, showed overall prices rose 1.0 percent in June from a month earlier and were up in every major Canadian city.

But the index was up just 1.8 percent from a year earlier, marking the smallest 12-month gain since November 2009.

The data adds to evidence that the Canadian housing market is recovering after slowing dramatically in mid-2012 when the government tightened mortgage lending rules in a bid to prevent a housing bubble.

"The June Teranet HPI report points to a nascent recovery in the housing market which is entirely consistent with our previous analysis that tighter mortgage regulations only have a temporary impact on housing," Mazen Issa, Canada Macro Strategist at TD Securities, said in a research note.

Canada's red-hot market in early 2012 led many observers to fear a housing bubble was forming, particularly as condo builders ramped up development in major cities including Toronto and Vancouver. While some economists still predict a U.S.-style crash, the spring recovery in sales has led some to believe Canada has achieved a soft landing.

Issa said the bounceback in activity in recent months will be limited on the upside as the supply of newly completed but unoccupied units hit the market.

"Moreover, stretched household balance sheets will limit mortgage credit growth and contribute to lower demand for real estate. Finally, the back up in bond yields since mid-May has begun to filter into the mortgage market and if sustained, it will impact affordability over the medium-term," he said.   Continued...