Canada home resales rise, debt-to-income hits fresh record


Reuters

WRAPUP 1-Canada home resales rise, debt-to-income hits fresh record


By Andrea HopkinsOTTAWA, March 15 (Reuters) - Canada's housing market
continued to gain speed in February, led by the hot Toronto
market, while consumer debt rose to a fresh record in the fourth
quarter, according to separate reports on Wednesday reinforcing
concern about household debt.
    Home resales rose 5.2 percent last month from January and
prices were up 16 percent from a year earlier as brisk sales in
and around Toronto, Canada's biggest city, offset cooling
elsewhere, the Canadian Real Estate Association said.
    The cost of getting into the housing market, which has risen
unsteadily since a brief pause in 2008-2009, has helped drive
household debt to fresh highs nearly every quarter in recent
years, sparking concern about a housing bubble and the impact it
will have on leveraged consumers if it bursts.
    The ratio of debt to disposable income rose to 167.3 percent
in the final three months of 2016 from an adjusted 166.8 percent
in the third quarter, Statistics Canada said. That meant
Canadians owed C$1.67($1.24) for every dollar of disposable
income.
    On a seasonally adjusted basis, households borrowed C$28.4
billion in the fourth quarter, up from C$18.7 billion in the
previous quarter. Mortgages made up C$18.9 billion of that
total, while consumer credit and non-mortgage loans were up
C$8.5 billion at C$9.5 billion.
    Years of low interest rates since the global financial
crisis, as well as rising home prices, have prompted Canadians
to steadily increase their debt, and the Bank of Canada has said
the high household debt is a potential vulnerability for the
financial system. [nL1N1FK1UQ]
    The real estate data reinforced a picture of a continued
housing boom in the Toronto area, where bidding wars are common,
and a cooling elsewhere, including in Vancouver, where a foreign
buyers tax imposed in August has dampened demand.
    "In and around Toronto, many potential move-up buyers find
themselves outbid in multiple-offer situations amid a short
supply of listings," Gregory Klump, CREA's chief economist, said
in the report.
    "As a result, they aren't putting their current home on the
market. It's something of a vicious circle from the standpoint
of a supply shortage and a challenge for first-time and move-up
home buyers alike."
    The group said actual sales, not seasonally adjusted, fell
2.6 percent from February 2016, but the supply of homes
tightened. The sales-to-new listing ratio rose to 69.0 percent
in February, well above the 40 to 60 percent ratio considered a
balanced market.
    (C$1 = $1.3459)

 (With additional reporting by Leah Schnurr and David Ljunggren;
Editing by Meredith Mazzilli)
 ((Andrea.Hopkins@thomsonreuters.com; 613 235 6745; Reuters
Messaging: andrea.hopkins.thomsonreuters.com@reuters.net))

Keywords: CANADA ECONOMY/ (WRAPUP 1)



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