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Canadian New House Prices Rise, but Uncertainty Remains

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New house prices in Canada increased further in February, after rising at the sharpest pace in 20 months at the start of the year.

The New Housing Price Index, courtesy of Statistics Canada, rose 0.2 percent in February, following a gain of 0.3 percent the previous month. A consensus of market analysts called for a monthly gain of 0.1 percent.

Like in January, the capital of Canada’s oil and gas industry was the top contributor to the February gain. The metropolitan region of Calgary saw prices rise 0.9 percent in February, following a gain of 1.3 percent the previous month that was also the largest increase since April 2007. Builders said market conditions and higher labour costs were the main factors behind the increase.

Compared to February 2013, national house prices increased 1.5 percent, matching the previous month’s annualized rate. Calgary saw house prices soar 6.9 percent over that period, while Toronto saw house prices climb 1.7 percent.

While Canada’s housing sector appears to be stabilizing, the unrelenting climb in house prices continues to be a key concern. House prices in the Toronto region, Canada’s biggest economic hub, rose 8.5 percent at the end of the first quarter, according to the Toronto Real Estate Board. The average sale price of homes in the Greater Toronto Area reached $557,684 last month.

The Canadian economy is expected to grow 2.3 percent this year, according to a revised estimate from the International Monetary Fund. However, the Washington-based organization said house prices continues to be a key vulnerability for Canada.

“… despite the recent moderation in the housing market, elevated household leverage and house prices remain a key vulnerability,” the IMF said in its latest report. “With inflation low and downside risks looming, monetary policy should remain accommodative until growth gains further traction.”

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