Canadian home resale prices increased in July, boosted by strong gains in Hamilton and Toronto.
According to the Teranet-National Bank Composite House Price Index, which is a weighted index of 11 cities across Canada, prices increased 1.9 per cent last month from a year earlier.
Toronto saw gains of 3.4 per cent, while Hamilton was up 6.7 per cent.
“Hamilton is an up market by any respect,” said National Bank senior economist Marc Pinsonneault. “The only weakness we see in Toronto is that there many unsold new condos, including those on pre-sale and under construction.
“That’s the only part of the Toronto market that you can say is weak,” he said.
On a monthly basis, the Teranet-National Bank House Price Index rose only 0.7 per cent in July, weaker than the average increase of 1 per cent seen over the last 12 years.
On a nation-wide basis, home prices have only increased by 1.9 per cent, in part because of a price correction that began in September 2012 and only ended a few months ago, Pinsonneault said.
Although home resale prices are higher than the current rate of inflation, Pinsonneault describes it as “subdued.”
Even if sale prices are lower than usual in August and September, based on the last year’s drop, home price inflation will still rise due to base effects.
However, Pinsonneault anticipates sales are likely to cool in the latter of the half of the year because Canadian banks began to raise interest rates on new mortgages in June, which will have an effect on affordability.
“It will be the worst since the start of the last recession,” he said.
The federal government also instituted new mortgage rules, which went into effect last July, making it tougher for home buyers, but affordability questions were mitigated by low interest rates.
Buyers holding pre-approved mortgages will able to take advantage of better mortgage rates, so the impact on home sales figures may not be felt until later in the year.
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