Canadian house prices were up in May compared to the same month last year, as were the number of sales.
Photo Credit: Steven Senne/Associated Press

Prices, sales of Canadian homes increase

The resale price of a home in Canada jumped 7.1 per cent in May compared to the same month last year, to $416,584, according to the Canadian Real Estate Association.  Sales in Toronto and Vancouver are particularly high and tend to skew the average price higher. Removing those two cities from the statistics, reduces the year-over-year increase to 5.3 per cent with an average house price of $336,373.

‘A little higher than expected’

“It was probably a little higher than expected but it’s not all that surprising when you consider all the market dynamics,” says Calum Ross, a mortgage expert with the Real Estate Investment Network.  He notes that the particularly cold winter meant sales were slower than usual and prices were lower. The arrival of spring released a bigger pent-up demand.  Interests rates continue to be very low as is the inflation rate, which continue to lead to an increase in prices.

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How many foreigners purchasing unclear

Canadians tend to believe that many foreigners buy houses in Canada and that that boosts sales and prices. But Ross says there are no firm statistics on that and he thinks the trend is greatly exaggerated. Those foreigners who do buy, tend to do so in Toronto, Vancouver and the oi-rich province of Alberta.

House prices are high in Canada and regulations require a minimum down payment, making it difficult for young people to buy in. Many are using a higher than usual proportion of their family income on housing. Ross advises people to educate themselves about personal finances and to plan for the long-term. They should also be prepared for the possibility that interest rates will go up, although he doesn’t think they will increase by a big margin if and when they eventually do.

He adds buyers should resist the temptation to over-extend themselves in order to turn a quick profit.

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