TORONTO (Reuters) - Canadian home resale prices rose for a fifth straight month in September, chalking up gains in five of six major markets, the latest sign of the housing sector’s strength in an otherwise struggling economy.
The Teranet-National Bank Composite House Price Index released on Wednesday showed that prices were up 1.3 percent nationally in September from August.
It was the smallest rise in four months for the index, which measures price changes for repeat sales of single-family homes without giving actual dollar figures. But it highlighted how record low interest rates continue to boost housing demand.
“On balance, there was broad-based strength in this report, which is consistent with other measures of the Canadian housing market,” said Ian Pollick, TD Securities’ economics strategist.
Teranet’s year-over-year national measure showed prices were down 1.8 percent from September 2008.
Canada’s housing sector escaped the massive crash seen in the United States and other Western countries, partly because its traditionally conservative banks avoided many of the lax lending practices that fueled a bubble in other markets.
While the market took a hit last year in the wake of the global financial crisis, it swiftly recovered. Recent figures showed sales of existing homes rose to a record monthly high in October.
The startlingly rapid rebound has raised concerns in some circles that real estate could become the next bubble. But analysts said Canada’s central bank won’t necessarily tighten monetary policy in response.
“For the time being, we do not believe this report will have any policy implications from the Bank of Canada as the Bank of Canada has not signaled any particular interest in the sector,” said TD’s Pollick.
Scotia Capital also said evidence of a housing bubble, or lack thereof, would not materially affect the central bank’s conditional pledge to keep rates at a record low hold until mid-2010, partly because the bank is less concerned about asset-specific markets when conducting monetary policy.
In recent remarks, Bank of Canada Governor Mark Carney has said a strong housing market was partly due to pent-up demand.
But the days of more-affordable home ownership may soon be winding down as ownership costs rose for the first time since the spring of 2008 across all housing segments, according to Royal Bank of Canada.
The RBC Housing Affordability measure for the third quarter showed on Wednesday that affordability “deteriorated in all provinces and major markets in Canada due to a slight rise in key mortgage rates and appreciation in property values,” said Robert Hogue, senior economist at RBC.
Vancouver, where prices were up 2.1 percent, had the biggest monthly rise, followed by Toronto, up 1.5 percent, according to the Teranet index. Calgary posted a 1.1 percent gain, while Ottawa rose 0.9 percent and Halifax climbed 0.6 percent.
Montreal was the only metropolitan area that reported a decline in the month, down 0.2 percent, although the Teranet report said the fall was “not due to a deterioration of market conditions.”
It said new listings in the city have slipped following a rise in home sales every month since May, citing statistics from the Greater Montreal Real Estate Board.
Marc Pinsonneault, senior economist at National Bank Financial, said that with the Teranet index close to its pre-recession level, it shows “more than ever” that the home price correction in Canada was “benign” when compared with the United States.
The widely watched Standard & Poor‘s/Case-Shiller indexes earlier this week showed U.S. home prices are also on the rise although the pace of appreciation slowed and was less than expected.
Editing by Jeffrey Hodgson and Rob Wilson