Canadian Housing Market showing some Growth

Canadian home sales gained for the first time in five months in August, led by Ontario and British Columbia, though economists warned the uptick is likely to prove a blip in a declining trend.
Sales of existing homes through the Multiple Listing System rose 4.1% from July, figures released Wednesday by the Canadian Real Estate Association showed. It was the first increase since March, it said. On a year-over-year basis, sales are down 22.5%.

Canada’s housing market, which helped drag the economy out of recession, has been cooling rapidly over the past few months. Consumers made purchases that would have been made in summer earlier in the year to beat rising interest rates and the introduction of the harmonized sales tax in Ontario and B.C.

“A large part of the August increase comes from Ontario and B.C. because there was a lot of confusion in July as to how the HST would affect home sales,” CREA chief economist Gregory Klump said. “This is a bit of a relief rally and one car does not make a parade.”

Klump still expects housing sales to cool throughout the rest of the year, though he says it’s a healthy slowdown from the feverish levels seen at the end of last year.

TD Bank Financial said in a note the August figures are likely to have been a blip.

The bank said high household debt, the weakening employment outlook and declining personal income would all weigh on the market. It expects sales to drop by 20% next year and prices to decline 7%.

The average price of homes sold in August was $324,928, which is on a par with the same period last year. Excluding Alberta and New Brunswick, where prices eased, gains in every other province exceeded the national increase, CREA said.

Seasonally adjusted sales activity was either flat or increased in half of all markets across the country, it said.

The Organization for Economic Co-operation and Development in a report on Canada earlier this week warned prices may still be too high and more intervention may be needed to cool the market.

CREA president Georges Pahud on Wednesday rebuffed those suggestions, saying any further tightening in mortgage regulations risk damaging the market.

“Rising interest rates and a projected slowdown in job growth mean that the Canadian housing market is expected to continue to cool,” Pahud said. “This is overlooked in recent commentary that suggests further changes to mortgage regulations may be needed.”

-Ottawa Sun Sept 15, 2010