TORONTO (Reuters) - Sales and prices of existing homes in Canada soared in December, capping a whirlwind 2009 that began weakly and then went on to set record highs for prices, and further stirring debate of a housing bubble.
The Canadian Real Estate Association said on Friday that a total of 27,722 homes changed hands in December, up 72 percent from the same month in 2008, when activity ground almost to a halt in the wake of the global financial crisis.
“Sales activity in 2009 came in like a lamb and went out like a lion,” said CREA President Dale Ripplinger.
CREA said the national average price in December rose to C$337,410 ($329,180), up 19 percent year-over-year. For the year as a whole, the national average price climbed 5 percent from 2008 to a record C$320,333.
The association reiterated that the national average price was skewed due to activity in Canada’s priciest markets.
Year-to-date activity was still trailing 2008 levels at the end of September 2009, but a 59 percent year-over-year gain in the fourth quarter, the best ever, pushed 2009 sales activity above annual levels for 2008, it said.
The robust figures continue to show the housing sector is leading the overall domestic economy out from a long downturn. But the housing market’s strength has also been at the center of a debate over whether a bubble in sector is forming.
“The raft of data will do nothing to quell talk of a bubble, talk that the Bank of Canada and the Canadian Real Estate Association have studiously downplayed,” said Doug Porter, deputy chief economist at BMO Capital Markets.
“And, before we officially jump on the bubble bandwagon, we would again point out that the reported price change is skewed by the surge in Vancouver and Toronto sales.”
The Bank of Canada, ahead of its interest rate decision next Tuesday, said this week it was premature to talk about such a possibility, a view echoed by Finance Minister Jim Flaherty on Friday.
“I do not see evidence of a bubble right now, but we’re going to keep watching. There are some steps we can take, that we will take if necessary,” Flaherty said in an interview on Business News Network on Friday.
He pointed to tools the government could use to cool the market, including raising credit requirements for insured mortgages, ensuring cautious lending practices, and reducing the maximum amortization periods of mortgages.
Record low interest rates have helped fuel the housing boom, while low supply and pent-up demand have also driven up prices.
But Scotia Capital economists Derek Holt and Karen Cordes said “dismissing housing risks is being a tad Pollyannaish.”
They said in a report that it was likely that housing will “experience a more sudden decline in activity in the back half of the year and into 2011.”
“The drivers are pointing to significant softening in both the supply and demand supports such that downside risks to house prices by 2011-12 are material and merit caution,” the economists wrote in a report.
CREA said December sales records were reported in Ontario, Quebec, Saskatchewan, New Brunswick, and Newfoundland and Labrador.
Average prices set annual records in a majority of local markets in 2009, and in every province except Alberta, the association said.
Seasonally adjusted national home sales totaled 46,805 units in December, concluding the strongest fourth quarter ever. A total of 137,957 homes were sold on a seasonally adjusted basis in the fourth quarter of 2009.