OTTAWA (Reuters) - Strong growth in Toronto’s housing market helped push up the prices of new homes in Canada by 0.3 percent in May, a month before the government announced it was tightening mortgage rules, according to Statistics Canada data released on Thursday.
The Toronto-Oshawa area posted a 0.5 percent increase on a monthly basis and 5.5 percent on the year. The annual increase for all of Canada was 2.4 percent, slightly down from 2.5 percent the month before.
Finance Minister Jim Flaherty announced stricter mortgage lending rules in June because of concern of a possible housing bubble, particularly in the condominium sector in Toronto, Canada’s largest city — in stark contrast to the weak U.S. market. Statistics Canada’s figures, however, cover only single-family homes, not condominiums and multiple-unit apartments.
The Bank of Canada has highlighted the housing market and high household debt as the two biggest domestic risks to Canada’s financial outlook.
A Royal LePage Real Estate survey this week said the Canadian market seemed to be at a tipping point, noting housing prices could not grow faster indefinitely than salaries and the underlying economy.
Statscan data last Friday showed the average hourly wage of permanent employees was 3.3 percent higher in June than a year earlier, a rate of increase that is higher than May’s 2.4 percent rise in new housing prices.
However, Royal LePage said the prices of standard two-story homes in Canada rose by 4.7 percent in the second quarter from a year earlier while detached bungalows were up 5.5 percent and standard condos up 3.3 percent.
Authorities have also expressed concern about the Vancouver market, but prices there only gained 0.1 percent on the month and were actually down 0.9 percent on the year.
Comparison with 2007 prices, which constitute the base level of the new housing price index, tells another tale. Toronto’s prices are up only 16.4 percent over that period, and Vancouver’s are actually down 1.8 percent.
Regina, Saskatchewan, is up 54.0 percent since 2007, because of a resource boom in the province. However, prices started at a significantly lower level in 2007 than in Toronto or Vancouver.
Reporting by Randall Palmer; Editing by Theodore d'Afflisio