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.
Just over half of all local markets saw improved sales, with gains in Vancouver and Toronto offsetting declines in Calgary and Montreal.
The number of newly listed homes declined by 1.4 percent on a monthly basis. About 340,980 homes have changed hands in Canada so far this year, 1.8 percent below levels seen in the first three quarters of 2012.
“The market seems to be evolving fairly constructively at this stage,” said Robert Hogue, senior economist at Royal Bank of Canada.
After fears of higher rates pushed some potential buyers to take the plunge in August, home sales figures could see some pay back for that increase in the months ahead, Hogue said.
“We wouldn’t expect that pay back to be that dramatic, but it might be just enough to ease any kind of emerging concerns the market is heating up again.”
Existing home sales climbed 2.8 percent in August.
CREA’s MLS Home Price Index showed prices rose 3.1 percent in September from last year.
A separate report showed home prices flattened at record levels in September, pointing to a cooler than usual market.
The Teranet-National Bank Composite House Price Index showed prices were unchanged last month from August, though the index was up 2.7 percent on an annual basis due to a decline in prices in September 2012.
Editing by Jeffrey Hodgson and Chizu Nomiyama