OTTAWA, March 15 (Reuters) - Canada’s housing market continued to gain speed in February, led by the hot Toronto market, while consumer debt rose to a fresh record in the fourth quarter, according to separate reports on Wednesday reinforcing concern about household debt.
Home resales rose 5.2 percent last month from January and prices were up 16 percent from a year earlier as brisk sales in and around Toronto, Canada’s biggest city, offset cooling elsewhere, the Canadian Real Estate Association said.
The cost of getting into the housing market, which has risen unsteadily since a brief pause in 2008-2009, has helped drive household debt to fresh highs nearly every quarter in recent years, sparking concern about a housing bubble and the impact it will have on leveraged consumers if it bursts.
The ratio of debt to disposable income rose to 167.3 percent in the final three months of 2016 from an adjusted 166.8 percent in the third quarter, Statistics Canada said. That meant Canadians owed C$1.67 ($1.24) for every dollar of disposable income.
On a seasonally adjusted basis, households borrowed C$28.4 billion in the fourth quarter, up from C$18.7 billion in the previous quarter. Mortgages made up C$18.9 billion of that total, while consumer credit and non-mortgage loans were up C$8.5 billion at C$9.5 billion.
Years of low interest rates since the global financial crisis, as well as rising home prices, have prompted Canadians to steadily increase their debt, and the Bank of Canada has said the high household debt is a potential vulnerability for the financial system.
The real estate data reinforced a picture of a continued housing boom in the Toronto area, where bidding wars are common, and a cooling elsewhere, including in Vancouver, where a foreign buyers tax imposed in August has dampened demand.
“In and around Toronto, many potential move-up buyers find themselves outbid in multiple-offer situations amid a short supply of listings,” Gregory Klump, CREA’s chief economist, said in the report.
“As a result, they aren’t putting their current home on the market. It’s something of a vicious circle from the standpoint of a supply shortage and a challenge for first-time and move-up home buyers alike.”
The group said actual sales, not seasonally adjusted, fell 2.6 percent from February 2016, but the supply of homes tightened. The sales-to-new listing ratio rose to 69.0 percent in February, well above the 40 to 60 percent ratio considered a balanced market.
C$1 = $1.3459 With additional reporting by Leah Schnurr and David Ljunggren; Editing by Meredith Mazzilli