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Canadian New House Prices Rise for Seventh Consecutive Month

H.S. Borji
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Canadian New House Prices Rise for Seventh Consecutive Month

New house prices in Canada rose for the seventh consecutive month in June, as healthy market conditions and new list prices kept property valuations rising in places like Toronto and Oshawa.

New house prices rose 0.2 percent in June, compared to a 0.1 percent gain the previous month, Statistics Canada reported today in Ottawa. The figure was in line with the median estimate of economists.

Compared to June 2013, new house prices advanced 1.5 percent, in line with forecasts.

The new housing price index measures changes in contractors’ selling prices of new residential homes. The monthly index covers single dwellings, semi-detached and row houses. It excludes condominium dwellings.

The new housing price index is used by economists and investors to track developments not only in the real estate sector, but the construction sector as well.

Gains were led by the combined metropolitan region of Toronto and Oshawa, which accounts for nearly one-third of the overall market. New house prices in this region advanced 0.3 percent, official data showed.

The city of Hamilton saw new house prices rise 0.6 percent.

The western city of Calgary, home to Canada’s oil and gas industry, posted a 0.3 percent increase in June. Compared to June 2013, new house prices in Calgary surged 7.3 percent.

New house prices were up in eight of Canada’s 21 metropolitan regions. Prices fell in seven regions and were unchanged in six.

Earlier this month Statistics Canada said building permits surged 13.5 percent in June, although the gains were driven by non-residential construction intentions. Still, the value of residential building permits increased for the fourth consecutive month at a rate of 0.4 percent.

Overall housing activity rebounded sharply in the second quarter, following a difficult first quarter that was hampered by severe weather. Housing starts in March fell to a five-year low of 157,500, which in hindsight was likely caused by inclement weather.

Last week the Canadian Mortgage and Housing Corporation said housing starts rose in July, fueling concerns the country’s housing market was overheating.

Groundbreaking increased 0.7 percent to a seasonally adjusted annual rate of 200,098, well above forecasts calling for a drop to 193,000.

The June rate was revised upward to 198,700.

July starts pushed the six-month moving average to 189,784.

The CMHC forecasts 184,800 housing starts for all of 2014.

According to the CMHC, the rise in housing starts is unlikely to jeopardize the Bank of Canada’s expectations for a cool down in housing activity. The BOC forecasts a “soft landing” for the housing market, as higher borrowing costs and rising house prices weed out potential buyers.

However, the central bank has voiced its concerns about an overheating market on several occasions. The BOC’s semi-annual review of the financial system, which was released in June, warned house prices in places like Winnipeg were rising faster than disposable incomes. Although a sharp correction in house prices is unlikely, the consequences would be huge.

An overheating housing market poses a challenge not just for financial institutions, but for indebted households, which are carrying record high debt loads.

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