TORONTO — Canadian home resale prices sagged in February from January, the Teranet-National Bank Composite House Price Index showed on Wednesday, and the pace of year-over-year growth has slowed.
The index, which measures price changes for repeat sales of single-family homes, showed prices fell 0.2% in February from January, in a modest cooling of what has been a hot market across much of Canada. It was the third decline in four months.
The index was up 6.1% in February from February 2011, but that was down from January’s 6.5% year-on-year rise.
“Today’s print is consistent with our theme of modest cooling in the housing market in 2012,” Andrew Kelvin, senior fixed income strategist at TD Securities, said in a research note. “In the very near-term, we expect that the low interest rate environment should lend support to housing in general.”
But TD expects interest rates to start rising in September, and Kelvin said higher rates could reinforce the cooling in the housing market.
The frothy housing market, and rising debt levels to finance home purchases, are two of the biggest concerns for Canadian policymakers as the domestic economy recovers from recession. Higher interest rates will add to debt servicing costs, with a knock-on effect on spending across the economy.
The Teranet index showed prices were down from the previous month in six of the 11 metropolitan markets surveyed. Victoria saw a 1.1% drop, while Vancouver slipped 0.3%. Edmonton dipped 1% and Calgary prices retreated 0.6%. Prices rose a steep 1.6% in Quebec City, with more modest rises in Halifax, Montreal and Winnipeg. In Toronto, one of the strongest markets in recent months, prices climbed 0.1%.
Year-on-year prices rose 10% in Toronto, followed by Winnipeg, up 8.2%. In Vancouver, which has also been a hot market, the 12-month gain was 6.2%, also above the national 6.1% average.
TD’s Kelvin said a modest cooling in the housing market will be most prevalent in regions where housing excesses are perceived to be the greatest, such as Vancouver.
“Keep in mind that while this data suffers from timeliness, it is broadly consistent with the timelier existing home series which has showed decreased activity in the Vancouver market,” he said. “Prices in Toronto remain buoyant however, with year-over-year appreciation remaining firm.”
The index, which is similar to the U.S. S&P/Case-Shiller home price index, tracks repeat sale prices, so properties with at least two sales are required in the calculations. It lags other home resale data by about six weeks.