MNI DATA REACT: Canada Home Prices to Climb as Supply Squeezed

--Sales-To-New-Listings Ratio At Lowest Since 2004, Realtors Say

By Greg Quinn

     OTTAWA (MNI) - Canada's home price gains are poised to quicken this year

with the supply of properties for sale at its lowest in more than a decade,

which could raise alarms for a central bank wary of froth returning to the

market.

     The 4.2 months of inventory of homes for sale in December was the lowest

since mid-2007, and more than a month below the long-run average, the Canadian

Real Estate Association said Wednesday. 

     "Its current reading suggests that sales negotiations are becoming

increasingly tilted in favor of sellers," the CREA report said. "Barring an

unforeseen change in recent trends for the balance between the supply and demand

for homes, price gains appear poised to accelerate in 2020."

     Average sale prices have already climbed by 9.6% in December from a year

earlier to C$517,124. That's the fastest pace since April 2017 and much faster

than the Bank of Canada's 2% inflation target and recent consumer income gains.

     Surging Toronto and Vancouver prices a few years ago is one reason BOC

Governor Stephen Poloz resisted last year's wave of rate cuts, leaving him with

the G7's highest benchmark borrowing rate. Poloz said last week that he's

watching for new signs of froth, along with risks of damage from global trade

tensions that threaten an economy otherwise near full potential.

     New listings of homes for sale are close to the lowest in a decade after a

1.8% decline in December, CREA said. The sales-to-new-listings ratio rose to the

highest since 2004 at 66.9% in December.

     Toronto has already moved into a seller's market based on some of the

inventory data, the report said.

     The supply squeeze added to a negative report that also showed sales fell

0.9% in December, breaking a run of increases that began in March. Sales still

climbed 23% from a year earlier, the most since March 2010, reflecting record

population gains and rock-bottom unemployment. The BOC has said that fundamental

demand justifies some of the gains in housing.

     Canada's CMHC housing agency reported separately on Wednesday that the

rental vacancy rate fell to the lowest since 2002, reaching 2.2%. The third

annual decline in the vacancy rate is another sign that demand for housing is

building relative to the supply, with rental rates on two-bedroom apartments

climbing the most since 2001. 

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

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