TORONTO (Reuters) - Sales of existing homes in Canada edged up in July from June and were much higher than a year earlier, the Canadian Real Estate Association (CMHC) said on Thursday in a report that suggested the housing market has leveled off after a spring surge.
The industry group for Canadian real estate agents said sales were up 0.2 percent in July from the month before. Actual sales for July, not seasonally adjusted, were up 9.4 percent from a year earlier.
July’s increase lifted sales to just below levels reached before Canada’s Conservative government tightened mortgage lending rules last summer.
Fearing a housing bubble after years of heated activity, the government changed lending rules to make it harder to take on too much debt to buy a house. The changes, which took effect in July 2012, shortened the maximum length of a government-insured mortgage and limited the amount that people can borrow against their homes.
The housing market slowed dramatically in response to the tighter rules, and some economists worried that the U.S. housing crash of the last decade would be repeated in Canada. But prices, which lag sales activity, have so far only slowed their rise, and the spring market brought the traditional seasonal bounce in home buying.
That now appears to be leveling off.
“More evidence that Canada’s housing market has absorbed last year’s mortgage rule tightening, and that the overall market remains balanced and well-behaved,” BMO Senior Economist Robert Kavcic said in a research note.
“Despite the bearish fingers pointed at Canada’s housing market, sales have rebounded 11 percent from their February low and now sit almost right in line with the 10-year average,” he added.
CREA’s home price index rose 2.7 percent in July from a year earlier to a record high.
Sales were led by double-digit gains in Vancouver, Calgary, Edmonton and Toronto.
A separate report from the federal housing agency showed new homebuilding in Canada is expected to stabilize in the second half of 2013 before increasing modestly in 2014 as employment, economic growth and net migration increase.
The Canada Mortgage and Housing Corp (CMHC) said housing starts will be in the range of 177,100 to 188,500 units in 2013, with a point forecast, or most likely outcome, of 182,800 units, down from 214,827 in 2012. For 2014, it forecast starts would range from 165,600 to 207,600 units, with a point forecast of 186,600.
CHHC said existing home sales will range from 431,600 to 466,200 in 2013, with a point forecast of 448,900, down slightly from the 453,372 in 2012. For 2014, it expects a move up to the range of 437,700 to 497,500 with a point forecast of 467,600.
Price gains are expected to slow in 2013 and 2014. CMHC’s point forecast for the average price calls for a 2.7 percent gain to C$374,800 ($362,500) 2013, and a 2.1 percent gain to C$382,800 in 2014.
Reporting by Andrea Hopkins; Editing by James Dalgleish; and Peter Galloway