The Canadian housing market continues to bounce back from a mini slump brought about by a range of macroprudential controls introduced last year on high loan-to-value ratio mortgage lending, which including shorter maximum loan amortisation periods (i.e. 25 years instead of 30 years).
After house prices fell for six consecutive months to February 2013, prices have since risen for five straight months, pushing Canadian housing values to their highest level on record, according to the Teranet repeat sales index (see next chart).
July’s house price results, just released by Teranet, showed house prices nationally rising by 0.7% and by 1.9% over the year, with values now 29% higher than their April 2009 low.
Looking at the major markets, record highs were recorded in Canada’s two biggest markets – Toronto and Montreal – where prices rose by 1.3% and 0.02% respectively in July. By contrast, in Canada’s third biggest city and bubbliest (and most supply-restricted) market – Vancouver – prices rose by 0.3% in July but were down 2.5% since values peaked in June 2012.
In real (inflation-adjusted) terms, Canadian house prices are also at a new record high, marginally above their prior peak in July 2012, with Toronto posting a new high, Montreal marginally below its July 2012 peak, and Vancouver down 3.7% from peak:
Despite the record prices, the outlook for Canadian housing remains mixed. As shown in the below CBC News video, the market is sending out mixed signals, with land purchases and building permits seemingly on the slide, and the condo market in Toronto looking increasingly vulnerable. Household debt is also at record levels, leaving Canadians vulnerable once mortgage rates are lifted from their current near record low levels.
