According to the latest numbers the correction of housing prices late in 2010 seems to have been a short-lived phenomenon, as for the second consecutive month prices increased overall in four of six Canadian metropolitan markets.
Canadian home prices in January were up 0.4 per cent from the previous month, according to the Teranet–National Bank National Composite House Price Index. It was the second consecutive monthly rise, following on three consecutive monthly declines. January prices were up from the previous month in four of the six metropolitan markets surveyed: 0.9 per cent in Vancouver, 0.5 per cent in Toronto, 0.4 per cent in Halifax and 0.3 per cent in Montreal. Prices were down 0.6 per cent in Ottawa, a fifth straight monthly decline, and one per cent in Calgary, a fifth decline in six months.
“January’s price increase confirms that the correction experienced towards the end of 2010 was short-lived,” said Marc Pinsonneault, senior economist with National Bank Financial Group. “In fact, market correction is now a local phenomenon (Ottawa and Calgary). At the national level, January’s prices were still one per cent below those in August 2010, but they were 5.5 per cent above their pre-recession peak.”
The 12-month gain in the composite index slowed to 3.9 per cent in January, the seventh consecutive month of deceleration. The largest 12-month rise was 8.2 per cent in Halifax. The 12-month increase was 6.4 per cent in Montreal, 5.3 per cent in Ottawa, 5.1 per cent in Vancouver and 3.9 per cent in Toronto. Only in Calgary were prices down from a year earlier, by 3.4 per cent.
The Toronto market is no longer tightening. Between January 17, when the federal minister of finance announced that the maximum amortization period for an insured mortgage would be reduced to 30 years from 35 years, and March 18, the announced effective date, the resale market may have been influenced by the prospect of this change.
According to Pinsonneault, market conditions are currently balanced in Canada. However the situation differs among regions. Conditions look somewhat tight in Vancouver and Toronto, while they are still favourable to buyers in Calgary. While house prices are high relative to income and rents, and a reduction in the maximum amortization period for insured mortgages from 35 to 30 years took effect recently, “there is no perspective of a sudden and severe price correction in Canada, given the fact that employment is well into expansion territory,” said Pinsonneault.
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