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Housing Market Picks Up Steam in Canada After Slow Start to Year

Housing Market Picks Up Steam in Canada After Slow Start to Year

(Bloomberg) -- Canadian home sales activity continued to rebound last month, suggesting the nation’s housing market is improving after a sluggish start to the year.

Home sales rose 1.9% nationally in May, the Canadian Real Estate Association said Friday from Ottawa. It’s the third-straight reported increase in transactions, after a brutal February which saw sales plummet as home buyers grappled with rising interest rates and tighter mortgage rules. National home sales rose to 39,351 on a seasonally adjusted basis, the most since January 2018.

The report is in line with other recent data that suggests housing has begun to recover from a recent slump, easing concerns that some of the country’s more expensive markets like Toronto were poised for a major correction. Sales in Canada’s largest city increased 4.7% in May after gaining 11% the month before, while in Vancouver they jumped 24%, the biggest one-month gain .

Friday’s report is “underscoring that sales are perhaps being more driven by fundamentals than they were before,’’ Rishi Sondhi, an economist at Toronto-Dominion Bank, said by phone. “The market may be moving away from the impact of previous policy measures.’’ Rishi said in a separate research note he expects sales to “trend higher, lifted by a rising population, a more stable rate environment and supportive federal measures.’’

A moderation in prices appears to be helping to boost demand. After peaking last year, following a five-year run of gains, benchmark prices have begun to inch lower. On a seasonally adjusted basis, prices have dropped now for five straight months, and are down 1.4% over that time. From a year earlier, benchmark prices are down about 0.6% nationally.

Housing Market Picks Up Steam in Canada After Slow Start to Year

CREA now predicts home sales nationally will rise 1.2% in 2019, a reversal from a previous forecast for a drop of 1.6%. The realtor group cited strong fundamentals outside of the prairie provinces, solid population and employment growth, and the expectation that the Bank of Canada will refrain from raising interest rates for the rest of the year.

The realtor group also cited changes to the federal government’s home buyer program, which were introduced in this year’s budget and which partly took effect in late March, as supportive.

“These factors are expected to support the beginnings of a recovery in home sales over the second half of 2019 after starting this year on a weak footing,” the group said in a release, though it cautioned sales would probably remain “well below” levels from recent years because of other government policy changes, in particular tighter mortgage qualification rules.

--With assistance from Erik Hertzberg.

To contact the reporter on this story: Chris Fournier in Ottawa at cfournier3@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary

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