(Recasts with 'bubble' comment)
By Andrea Hopkins
OTTAWA Feb 15 Resales of Canadian homes fell
1.3 percent in January from December but prices continued to
climb in Toronto, the nation's largest market, and have spilled
over into nearby cities in what was called a property "bubble."
The Canadian Real Estate Association (CREA) said on
Wednesday that home prices were up 15.0 percent in January from
a year ago even as sales declined in most markets. Toronto
prices soared 22.6 percent despite the introduction last year of
tighter mortgage rules.
"Let's drop the pretense. The Toronto housing market - and
the many cities surrounding it - are in a housing bubble," Doug
Porter, chief economist at BMO Capital Markets, said in a
"Toronto and any city that is remotely within commuting
distance are overheating, and perhaps dangerously so. It's a
very different story in most of the rest of the country, where
conditions are generally calm and under control," he added.
Canada has repeatedly reined in mortgage lending in a bid to
cool off housing markets. While most markets have calmed,
double-digit price gains in Toronto have helped to buoy the
national market and confounded policymakers who see slow growth
in much of the rest of the economy.
Official interest rates are near historic lows and rate
hikes are not expected anytime soon because of labor market
weakness, which means homebuyers still have access to cheap
money. Household debt is at record highs.
The housing report showed actual sales, not seasonally
adjusted, were up 1.9 percent from January 2016.
CREA said even lower sales may not keep a lid on prices,
with low inventory of homes in Toronto and parts of British
Columbia helping to drive increases in the biggest markets.
"Unless sales activity drops dramatically, the outlook for
home prices remains strong in places that face a continuing
supply shortage," Gregory Klump, CREA's chief economist, said in
Prices in Vancouver have receded from their August 2016 peak
after a 15 percent foreign buyers tax was levied in the city
that month. The tax was imposed after local residents complained
that wealthy foreigners, mostly from mainland China, were
driving prices out of reach.
Tight supply continues to make it a seller's market, the
report showed. The number of newly listed homes fell 6.7 percent
in January from December, driving the sales-to-new listings
ratio up to 67.7 percent. A ratio between 40 percent and 60
percent is considered a balanced market.
(Editing by W Simon, Nick Zieminski and JS Benkoe)