Canadian rising resale home prices set to stall: Teranet report

OTTAWA— A fourteen-month stretch of rising home prices could soon be broken, despite gains in June that were the largest since last August, analysts said Wednesday.

Resale home prices rose 1.5 per cent in June, according to the Teranet-National Bank house price index, released Wednesday. On an annual basis, prices were up 13.6 per cent, driven higher by gains in Vancouver, up 16.3 per cent, and Toronto, up 16.2 per cent.

The monthly advance comes after resale home prices rose 1.3 per cent in May, 0.8 per cent in April and 0.3 per cent in March. But the report stated that series of gains may be about to stall. “We do not believe that acceleration in the Teranet-National Bank index will be sustained,” said Marc Pinsonneault, economist with National Bank Financial. “The number of existing homes sold has declined in each of the four months ending last July, and it did so to a proportionally larger extent than the number of new listings,”he said. ”

At the national level, the market is now at the boundary between balanced conditions and conditions favourable to buyers. This heralds a deceleration in home price inflation, especially since a harmonized sales tax was introduced on July 1 in Ontario and B.C.” Diana Petramala, an economist at TD Economics, pointed out that the Teranet survey is at odds with the widely quoted measure provided by the Canadian Real Estate Association, which has been showing a trend of moderation in home price growth since January 2010. By CREA’s measure, Petramala wrote in a commentary, home prices have dropped 3.7 per cent since their peak in April. “The Teranet measure has been lagging the CREA measure by about four to five months, suggesting that this measure too will soon show a slowing in the Canadian existing home market,” said Petramala. “All said, home prices as measured by CREA are expected to fall a further six to seven per cent through the rest of this year.

The Teranet estimate of home prices should follow CREA’s lead, albeit showing a lesser decline.” For June, prices rose 2.7 per cent in Ottawa, 2.4 per cent in Toronto, 1.4 per cent in Montreal, 1.3 per cent in Halifax, 0.8 per cent in Vancouver and 0.2 per cent in Calgary. The Teranet index tracks home-price changes in six Canadian cities — Halifax, Montreal, Ottawa, Toronto, Calgary and Vancouver — and is estimated by tracking the observed or registered home prices over time. Properties with at least two sales are required in the calculations.

Source: The National Post

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