Spring selling season gets off to limp start as Canada’s home prices gain least since recession
Posted on May 23, 2014 in Mortgage Market Updates and NewsReuters
TORONTO — Canadian resale home prices rose in April, but the start of the hotly anticipated spring selling season appeared milder than usual, the Teranet-National Bank Composite House Price Index showed on Wednesday.
The index, which measures price changes for repeat sales of single-family homes, showed home prices were up 0.5% from March, when month-on-month prices were flat.
Canada’s housing market has risen strongly if unsteadily in the past five years, and economists have been waiting for the spring data to gauge whether it is cooling or heating up again.
“Though (April’s) gain might appear robust, it must be said that apart from the recession in 2009, the composite index always advanced in April, the average monthly increase having been 0.9%,” Teranet said in the report. “Last month’s advance is indeed the third weakest for April, outside a recession, since 1999.” Prices were up 4.9% from a year earlier, an acceleration from March’s 4.6% price gain.
Home prices have marched mostly higher since 2009, straining affordability, but mortgage rates have remained low, and have fallen in recent days, which could extend the market’s strength.
Some economists have predicted the market will crash, but most have said they expect sales and new construction to level off in 2014 and 2015, when many see the Bank of Canada raising interest rates, dampening demand. “From a fundamental perspective, we do not see much scope for prices to rise further as the housing market has shifted into lower gear compared to previous years,” Mazen Issa, senior Canada macro strategist at TD Securities, said in a research note.
“We continue to see this year as benign for the housing market and expect prices to edge lower in 2015, when we expect the Bank of Canada to recommence tightening,” he added.
The Teranet data showed that prices rose in nine of 11 markets in April from March, led by a 1.5% gain in Calgary. Prices were up 0.8% in Montreal, 0.7% in Halifax, Hamilton and Ottawa, 0.6% in Edmonton, 0.5% in Vancouver, 0.4% in Winnipeg and 0.3% in Toronto.
Prices fell 1.0% in Victoria and 0.5% in Quebec City.
Year-over-year price gains were seen in just six of the 11 markets surveyed. The Teranet data once again showed big regional disparities among Canada’s 11 major urban markets, with several cities in Western Canada benefiting from a resource boom and cities east of Toronto seeing declines.
Prices were up 10.0% in Calgary, 9.0% in Vancouver, 5.8% in Toronto, 5.3% in Hamilton, 4.0% in Edmonton and 2.5% in Winnipeg.
Compared with a year earlier, prices fell 3.5% in Halifax, 2.4% in Quebec City, 0.7% in Victoria, and 0.4% in Ottawa and Montreal.
© Thomson Reuters 2014