House price growth slows in Canada, latest figures show

Increasing interest in market for condo apartment units, says CREA

The MLS Home Price Index, the leading measure of Canadian home prices, continued rising in February 2012, according to the latest statistics released from the Canadian Real Estate Association (CREA).

Year on comparisons continued shrinking, providing further evidence that Canadian home price growth may be topping out, said CREA.

The index in February 2012 was up 5.1% from its year ago level, the smallest increase since June 2011 and the fourth consecutive month in which gains slowed.

Toronto posted the largest increase at 7.3%, but momentum continued fading. Price increases also moderated further in Calgary at 2.5% and Montreal at 1.6%. Gains decelerated in all housing categories tracked except two storey single family homes.

The Aggregate Composite MLS Home Price Index rose 1.1% on a month on month basis in February 2012. Prices were up most for two storey single family homes at 1.6%, while townhouses and apartments saw smaller gains at 0.4% and 0.5% respectively.

‘Home price growth is generally slowing. At the same time, price gains and trends differ among housing markets tracked by the index,’ said CREA president Gary Morse.

CREA chief economist Gregory Klump pointed out that the MLS Home Price Index typically rises in February from the previous month as demand increases leading into the spring housing market.

‘The monthly price increase in February this year was less than what we saw in either of the past two years, which is more evidence that the trend for Canadian home prices is slowing,’ he added.

Among housing categories tracked by the index, single family homes posted the biggest month on month gains in most markets, particularly in Toronto where they are in short supply relative to strong demand.

Interest in the market for condo apartment units has increased recently, particularly Toronto’s condo market. With Toronto’s year on year increase in the MLS HPI for apartments at 4% it is likely that Toronto’s condo market will remain of particular interest.

The MLS HPI shows that price gains are decelerating for condos in Toronto. In other markets, year on year price gains for condo apartment units are near the overall rate of consumer price inflation. This suggests that the condo market is not overheating.

A number of new condominium apartment projects have been completed in the GTA over the past year. Some of these new units have been listed for sale, resulting in a better supplied market.

The number of months of inventory for condo units in the GTA on the Toronto Real Estate Board’s MLS® System is running close to its long term average. This suggests the GTA condo market is balanced, which is consistent with moderate price growth.

CREA also points out that the number of condo developments due for completion annually is unlikely to result in a glut of supply relative to demand and consequent price correction. Barring an unexpected spike in interest rates, economic downturn or overly restrictive further changes to mortgage regulations, the condominium apartment market is likely to remain balanced for the foreseeable future, it concludes.

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