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Montreal leads home price increase

Montreal leads home price increase

Market cooling elsewhere; Reports seem to indicate no crash likely as value of sales up 2.5% in past year

 

Prices for new homes in Canada edged up in December, led by the Toronto and Montreal regions, Statistics Canada said Thursday.

Prices rose 0.1 per cent during the month, following a 0.3 per cent increase in November, the federal agency said. The December increase was slightly below economists' forecasts for a 0.2-per-cent gain.

On a year-over-year basis, prices were up 2.5 per cent.

"The metropolitan regions of Toronto and Oshawa, and Montreal were the top contributors to the increase in December," the agency said. "The positive impact of these metropolitan regions on the overall index was offset in part by decreases observed in Vancouver and in Hamilton."

Prices were unchanged in 12 of the 21 metropolitan regions tracked by Statistics Canada.

BMO Capital Markets economist Robert Kavcic said Canadian residential construction activity "continues to look steady overall, but there are some notable trends taking place below the surface - namely the robust pace of building in the Ontario condo sector to meet equally robust demand."

On Monday, the Canadian Real Estate Association released its home price index, which looks at just five markets comprising 50 per cent of the Canadian real estate market. That index showed January home prices up 5.2 per cent year-over-year, an indication that home prices are heating up again at least in those five markets: Calgary, the Fraser Valley in B.C., Vancouver, Montreal and Toronto.

"While home prices remain up compared to one year ago, price growth from one month to the next has been slowing, causing year-over-year gains to shrink, and prices are generally expected to continue to stabilize this year," said CREA president Gary Morse.

Thursday's housing price index was the third housingrelated report to be released this week. Taken together, the three paint a decidedly mixed picture that wasn't entirely unexpected. In his look-ahead for this week, BMO Capital Markets senior economist Benjamin Reitzes wrote the "trio of housing releases is expected to be consistent with a cooling, not collapsing, Canadian housing market." BMO's economists were among those calling for a 0.2-per-cent increase in housing prices in December, which would have taken the year-over-year gain to 2.6 per cent - "a 15-month high, but nothing to get excited about," Reitzes said.

On Tuesday, Statistics Canada reported the value of building permits issued in December soared 11 per cent, largely due to an increase in permits for multifamily dwellings in Ontario, while Wednesday's housing starts report from Canada Mortgage and Housing Corp. showed a slight decline in housing starts in January.

The current low interestrate regime has been seen as a major factor in the continued heat in what TD Economics economist Dina Petramala has called Canada's "overbuilt and overpriced" housing market.

With household debt-to-income ratios at historic highs and still rising, the Bank of Canada has warned over the past year that Canadians are living beyond their means.

"We have expressed on numerous occasions our concerns about rising household indebtedness," senior deputy governor Tiff Macklem told reporters following a speech in Toronto on Tuesday. "The simple fact is that consumers are consuming more than they're earning."