Canada's Housing Bubble

Apr 29, 2010 Robert Bostelaar The Ottawa Citizen

Canada's real estate boom showed signs of easing in February, with prices in Ottawa even slipping from the month before, according a report issued Wednesday.

The Teranet-National Bank composite house price index revealed a one-per-cent drop in Ottawa values as well as a 0.4-per-cent decline in Calgary.

Across Canada, prices rose 0.2 per cent, the smallest increase since the start of a post-recession rebound.

But Ottawa prices were still up 7.2 per cent from a year earlier, and the slight drop from January wasn't viewed as evidence of any new trend.

"We have already seen, during the recovery, an isolated monthly price drop for other cities -- and why not for Ottawa?" said Marc Pinsonneault, senior economist with National Bank Financial Group.

The Ottawa Real Estate Association has also reported a drop in prices despite a "brisk February" for sales.

The association said the average transaction price was $317,030, down from $320,966 in January.

Board president Pierre de Varennes cautioned not to make too much of the small samples provided by early-year sales.

"It's a little difficult to extrapolate from the two lowest months, which are January and February," he said.

Unlike studies based on Multiple Listing Service sales, the Teranet-National Bank index tracks data from public land registries in six metropolitan areas. It measures price changes but does not report on specific values.

Its findings can vary widely from price information from the Canadian Real Estate Association, but Mr. Pinsonneault suggested the CREA figures may not give a full picture of a market.

In Toronto, for example, a large part of a 19.4-per-cent jump in prices reported by CREA was driven by sales of properties worth more than $500,000, he said. The composite index pegs Toronto's year-over-year increase at a lower, though still hefty, 13.3 per cent.

The rate of increases in Canada is expected to continue to ease.

"This development is consistent with a general loosening of market conditions across the country," said Pinsonneault.

"For some months now, homes have been coming on the market faster than they have been selling."

In Ottawa, however, listings remain in short supply, and the board is projecting strong sales through May, with the market returning to more balanced conditions in later months.