Home prices in Canada surge amid continuing low interest rates

Sales of existing homes increase 30pc in Toronto and 64pc in Vancouver from a year earlier

PUBLISHED : Wednesday, 09 October, 2013, 12:00am
UPDATED : Wednesday, 09 October, 2013, 6:05am

Home sales in Canada's largest markets surged in September from a year earlier as historically low interest rates continued to lure buyers.

Sales of existing homes in Toronto, Canada's largest market by value of transactions, rose 30 per cent from the same month last year to 7,411 units, the city's real estate board reported. Sales in Vancouver, the second-largest market, jumped 64 per cent, according to that city's board.

Housing market data show few signs of a hard landing after warnings from economists and policy makers that a bubble may have been forming. Buyers appear to be rushing into the market before mortgage rates rise further, said Derek Holt, an economist at Bank of Nova Scotia.

"Much of this sales strength of late has been brought forward at the expense of later in the year and particularly into the spring market next year," Holt, vice-president of economics at Scotiabank in Toronto, said by telephone.

"I find it a little disturbing to see in some quarters that the four- or five-month trend has been fist-pumped as a source of great optimism," said Holt, who also cited rising mortgage rates, the impact of weak job growth and record high home prices and household debt levels as reasons for caution.

The Canadian Real Estate Association, which publishes aggregated national data around the middle of each month, said on September 16 that sales increased 2.8 per cent in August, a sixth consecutive gain.

Recent gains follow a contraction at the end of 2012 after Finance Minister Jim Flaherty tightened government-insured mortgage rules on speculation a glut of flats might lead to sharp price declines. The Office of the Superintendent of Financial Institutions, the nation's federal banking regulator, released tougher mortgage-lending standards last year.

The effect of those measures may be dissipating.

"It's great news that households have found that the costs of home ownership, including mortgage payments, remain affordable," Dianne Usher, president of the Toronto realtor group, said in a statement sent by e-mail.

The average price of a home sold in Toronto climbed 6.5 per cent from a year earlier to C$533,797 (HK$4 million), the board said. The average sale price of a home in Vancouver is up more than 8 per cent, according to Bloomberg calculations.

Combined sales in six major real estate markets that have reported data for September, including British Columbia's Fraser Valley and Victoria, Calgary and Edmonton, increased 30.7 per cent in September from a year ago.