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Real estate values differ widely across the country

October 22-2014

 In its monetary policy report today, the central bank said housing activity “has been more robust than anticipated, buoyed by continued very low mortgage rates and exhibiting strength beyond a rebound from weather-depressed levels earlier in the year.”

However, it highlighted big regional divergences colouring this picture.

Housing markets in eastern Canada “appear to show signs consistent with a soft landing,” given slower price increases and sales volumes.

"This contrasts with major cities in Ontario, Alberta and British Columbia, where housing markets are generally robust and much tighter," it said.

“They have frankly been surprised at the underlying strength in housing and consumer spending, and now explicitly tie that to low interest rates,” Mr. Porter of BMO Nesbitt Burns said.

“There is no more brave talk about a soft landing for housing.”

Over all, Bank of Canada Governor Stephen Poloz and his colleagues noted “renewed vigour” in residential real estate. They also noted stronger car sales.

“Housing activity has been more robust than anticipated, buoyed by continued very low mortgage rates and exhibiting strength beyond a rebound from weather-depressed levels earlier in the year,” it said in the report.

“Housing starts have remained broadly in line with demographic demand in recent months,” it added.

“However, sales of existing homes have picked up noticeable since the beginning of the year, to a four-year high … This is contributing to sizable increases in house prices, although the national picture continues to mask important regional divergences.”

According to the Teranet-National house price index, home prices in Canada rose 0.3 per cent in September from August and 4.9 per cent from a year earlier.

Notably, Calgary, Toronto and Vancouver were well above the national average, at 9.5 per cent, 7.4 per cent and 6.5 per cent, respectively.

debt ‘are edging higher,’” he added.

“The focal point of that ‘stronger than expected’ housing market has been in Calgary, Toronto and Vancouver, as we (and others) have noted. Most of the rest of the country is not seeing particular strength in housing.”

What’s important here is that the strength in various housing markets is “localized,” as Mr. Porter put it, and thus “broad” policy measures are not necessarily the best way to deal with it.

As in, “higher interest rates would hit all markets, including many cities that don’t need cooling.”

As The Globe and Mail’s Barrie McKenna reports, the Bank of Canada also held its benchmark overnight rate at 1 per cent today, bringing to more than four years its longest rate freeze since the 1950s.

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