Low mortgage rates fuel rise in home sales in Canada

PUBLISHED : Wednesday, 20 August, 2014, 5:21am
UPDATED : Wednesday, 20 August, 2014, 5:35am

Sales of existing homes in Canada rose last month to their highest level since March 2010, notching their sixth consecutive monthly increase after a slow winter, the Canadian Real Estate Association said.

The association said sales gained 0.8 per cent from the previous month, surpassing June's downwardly revised 0.6 per cent rise. Actual sales, not seasonally adjusted, grew 7.2 per cent from a year earlier.

Canada's housing market has roared back to life after an especially brutal winter that hurt home-building, sales and prices. The rebound has been bolstered by low mortgage rates, which are not expected to rise significantly until next year.

"The [recent decline in mortgage rates] will prove to be the more important determinant over the rest of the year," Mazen Issa, a senior Canada macro strategist at TD Securities, said in a research note.

"While we do expect that higher rates will curtail housing market activity, the magnitude remains small. The true catalyst will be the next stage of the policy normalisation process by the Bank of Canada, which we do not expect will happen until the second half of 2015."

The real estate association's home price index rose 5.3 per cent from July last year, little changed from June's 5.4 per cent gain.

The national average price for homes sold last month, not seasonally adjusted, was C$401,585 (HK$2.9 million), up 5 per cent from last year.

"Low mortgage interest rates continue to bolster home sales activity," said Gregory Klump, the association's chief economist. "With the Bank of Canada widely expected to hold interest rates steady until next year, mortgage financing will remain attractive over the second half of 2014."

The national sales-to-new-listings ratio was 53.6 per cent last month, little changed from 53.4 per cent in June.