Newspaper article The Canadian Press

Toronto Home Prices Up but Rising Mortgage Rates Could Spell Trouble: Economists

Newspaper article The Canadian Press

Toronto Home Prices Up but Rising Mortgage Rates Could Spell Trouble: Economists

Article excerpt

Toronto housing sales down slightly in June

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TORONTO - The average sale prices of Toronto homes continued to climb in June, but rising mortgage rates and an oversupply of condos could spell trouble for the city's real estate market, according to economists.

Housing sales in the Greater Toronto Area were down by less than one per cent in June compared with the same month a year ago, according to a report by Toronto Real Estate Board released on Thursday.

But the average selling price was up by 4.7 per cent to $531,374, driven by single-detached and semi-detached houses, particularly in Toronto.

Meanwhile, home sales in Vancouver were up 11.9 per cent in June compared with a year ago, but down from the previous month.

On Wednesday, the Real Estate Board of Greater Vancouver said there were 2,642 homes sold through its Multiple Listing Service in June, up from 2,362 sales in June 2012, but down from the 2,882 sales in May 2013.

Robert Hogue, a senior economist at Royal Bank (TSX:RY), said the numbers indicate that Vancouver's real estate market is on the rebound after hitting its lowest points last year.

But economists say Toronto's market still faces some potential risks.

Adrienne Warren, an economist at the Bank of Nova Scotia (TSX:BNS), said rising mortgage rates could make single detached homes in markets like Toronto and Vancouver too pricey for first-time home buyers.

Rates have been at all-time lows since the economic downturn, but have slowly begun rising in the past two months.

"At the same time because supply is tight and unlikely to increase significantly, I think that will probably put a floor underneath how low the prices could move," said Warren.

It will all depend on how quickly and dramatically bond yields rise, said Hogue.

"If (the current) rate of increase is sustained for another month or two, that could put a bit more stress on the housing market," said Hogue. …

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