Canadian home prices rose 2.3 per cent year-over-year in August according to the Teranet-National Bank monthly report released yesterday.
While the index is at an all time high, not everyone views the continued rise of Canadian home prices as a sign of market strength.
Sadiq Adatia, chief investment officer at Sun Life Global Investments Inc., believes Canadian home prices could decline between 10 and 15 per cent as mortgage rates rise and supply increases.
“I don’t think the demand is going to be there for housing,” he said.
According to an article that appeared this week in Bloomberg, Adatia made the comments while speaking at the Bloomberg Canadian fixed-income conference in New York.
August was hailed as a hot month for sales in many major Canadian markets. The Toronto Real Estate Board reported a 21 per cent year-over-year boost in sales in August and Ottawa saw a 6.5 per cent jump over August 2012. Greater Vancouver home sales saw an even bigger rise, soaring 53 per cent in August. The month was also kind to Calgary, which saw a 27.5 per cent year-over-year increase and a particularly impressive performance on the luxury end of its market.
Adatia was not encouraged by the rallies in sales, saying the activity is being driven by buyers rushing in as banks raise borrowing costs. He also characterized the August boost as a “dead cat bounce.”
Dead cat or not, many Canadian markets were looking swell moving into the busy fall season. While Canadian banks have been hiking mortgage rates, the Bank of Canada is still holding steady on its 1 per cent overnight rate.
A Bloomberg economist survey found that the Canadian jobless rate will exceed the US in 2014 as hiring slows and the Bank of Canada will delay raising rates until the fourth quarter of next year.
Photo: My name’s axel/Flickr