Canadian home sales, prices make further gains in September

Tue Oct 15, 2013 5:56pm EDT
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By Leah Schnurr

TORONTO (Reuters) - Sales of existing homes in Canada jumped in September from a year ago and prices rose, though analysts cautioned the gains came partly on the back of depressed activity in 2012 that followed tighter mortgage rules.

Still, compared to August, sales in September edged up 0.8 percent, the Canadian Real Estate Association (CREA) said on Tuesday, suggesting Canada's resilient housing market is still attracting buyers.

The housing sector has been a major driver of Canadian economic growth coming out of the recession, but the market has been plagued by worries it has over-extended itself and is due for a correction.

Concerned about high levels of household debt, the government tightened mortgage lending rules four times since the financial crisis. After the latest intervention, in July 2012, the property market cooled markedly. But the market bounced back this spring, with many buyers making purchases ahead of an expected increase in borrowing costs.

Last year's lower levels pushed September's actual sales activity up 18.2 percent compared to September 2012 on a non-adjusted basis.

"This report points to signs of stabilization in the housing market, which is a welcome development after a period of resiliency this year," Mazen Issa, macro strategist at TD Securities, wrote in a note.

"The ramp up in activity in this year is consistent with the temporary impact of tighter mortgage regulations from summer 2012, while the back-up in mortgage rates in recent months has pushed fence-sitters with pre-approved mortgages to enter the market," Issa wrote.

High consumer debt and slower mortgage growth should naturally slow momentum in the housing market, said Issa.   Continued...

A sold sign is displayed in front of a home in Toronto December 15, 2009. REUTERS/Mike Cassese