\nNew property prices rose more than expected in Canada rising 0.4% in November, the fifth monthly rise in a row and adding confidence for the real estate market outlook for 2010.\n<\/p>\n
\nThe latest published figures from Statistics Canada also show that on a yearly basis, prices fell 1.4% in November following a 2.1% decline in October.
\nThe pick-up in new housing prices follows news from Canada Mortgage and Housing Corporation that housing starts staged a broad-based advance in November, rising 5.9% to an annualized rate of 174,500 units. Resale prices, meanwhile, have risen 21% from a year ago.\n<\/p>\n
\nOf 21 metropolitan areas surveyed by Statistics Canada, only three – Hamilton, Saskatoon and Greater Sudbury and Thunder Bay – recorded monthly declines.
\nThe biggest gains were posted in the Ontario region of St. Catharines-Niagara, up 1.4% month-over-month and Quebec, up 0.9%.\n<\/p>\n
\nSome analysts are already talking about a real estate bubble and calling for a rise in interest rates to cool the property market but this has been dismissed a premature by the Bank of Canada which said that it would be akin to \u2018dousing\u2019 the economic recovery with cold water.\n<\/p>\n
\n\u2018Recent house price increases do not appear to be out of line with the underlying supply-demand fundamentals,\u2019 said David Wolf, an advisor to the bank\u2019s governor.\n<\/p>\n
\nWolf said property bubbles, such as the one in the US that helped spark the global economic downturn, are usually fuelled by credit expansion, as borrowers and lenders take false comfort from exaggerated house prices.\n<\/p>\n
\nThe current rally, during which existing-home sales have climbed more than 40% on a year-over-year basis and prices have surged nearly 20%, is largely due to \u2018temporary factors\u2019, he explained including low interest rates and pent-up demand. Also some buying was the result of people realizing there is a once-in-a-lifetime opportunity to acquire property with historically cheap financing.\n<\/p>\n
\n\u2018These factors cannot continue to drive home sales and prices. Thus, we see the housing market as requiring vigilance, but not alarm. If the bank were to raise interest rates to cool the housing market now when inflation is expected to remain below target for the next year and a half, we would, in essence, be dousing the entire Canadian economy with cold water, just as it emerges from recession. As a result, it would take longer for economic growth to return to potential and for inflation to get back to target,\u2019 he said.\n<\/p>\n
\nThe Bank of Canada has pledged to keep its benchmark rate at a record low 0.25% until July in an effort to foster growth and bring inflation to the central bank\u2019s preferred 2% target which is expected in the second half of 2011.<\/p>\n","protected":false},"excerpt":{"rendered":"
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