MNI DATA IMPACT: Canada Q4 Home Prices +0.6% in Expanded Index

--StatsCan Now Including Condos At Heart of Boom Question

By Greg Quinn

     OTTAWA (MNI) - Canadian home prices rose 0.6% in the fourth quarter versus

the preceding three-month period, according to an expanded index that now

includes condos at the heart of questions about stretched Vancouver and Toronto

markets that led the Bank of Canada to resist rate cuts.

     Statistics Canada's Residential Property Price Index published Wednesday

showed a 1.2% gain in the quarter from a year earlier. The measure includes the

longstanding New Housing Price Index and data on condos and home resales for six

major cities.

     The lack of condo data left policy makers struggling to assess whether a

boom in Vancouver and Toronto was fueled by growing populations and incomes or

by dangerous speculation from investors and foreign buyers. BOC Governor Stephen

Poloz last week opened the door to a rate cut by shifting emphasis from record

household debts to damage from global trade tensions.

     Toronto prices rose 0.4% in the fourth quarter compared to the third

quarter, including a 1.5% gain for condos and 0.7% for home resales. Resale

prices rose 4.6% during all of last year, more than double the BOC's 2%

inflation target. 

     Poloz resisted joining the largest wave of rate cuts since the global

financial crisis, citing signs of froth returning and resilient domestic

spending that kept the economy near full capacity. The BOC's housing finance

views will be updated Thursday in a speech on that topic from Deputy Governor

Paul Beaudry.

     In Vancouver, where the market ebbed last year after governments toughened

mortgage qualification rules and imposed taxes to curb speculators, prices rose

for the first time in six quarters. Home costs rose 0.2% in the fourth quarter,

curbing last year's decline to 2.1%, still leaving the city with Canada's

highest total housing costs. 

     The potential drag on consumer spending and fears of defaults will be long

lasting. Sales of multi-unit housing have overtaken the dollar value of

traditional homes as skyrocketing prices forced some buyers to take on debts

exceeding 500% of their incomes. StatsCan published a first report in November

saying condo prices jumped 19% between the third quarter of 2019 and the third

quarter of 2019, much faster than the 5.8% gain in houses.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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