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UPDATE 2-Growth in Canadian new home prices slows in Dec
February 9, 2012 / 1:35 PM / 6 years ago

UPDATE 2-Growth in Canadian new home prices slows in Dec

* New home prices rise less than expected in Dec

* Prices flat in 12 cities, up in 7, down in 2

* Recent data suggests housing market is cooling

By Louise Egan

OTTAWA, Feb 9 (Reuters) - The pace of growth in new home prices in Canada slowed in December to 0.1 percent compared with 0.3 percent in November, Statistics Canada said on Thursday, in another sign the hot housing market may be cooling.

Markets had expected a 0.2 percent price gain in the month, according to the median forecast in a Reuters survey.

Compared with a year earlier, the new housing price index rose 2.5 percent in December, the same rate as in the previous two months.

Strong demand for housing helped propel Canada’s economy to quick recovery following a 2008 recession. But continued high prices and heavy borrowing amid rock-bottom mortgage rates has policymakers worried about overheating.

They fear eventual interest rate hikes and a decline in prices could push many consumers into bankruptcy.

Bank of Canada Senior Deputy Governor Tiff Macklem said this week the central bank remains concerned about high household debt levels, which are approaching levels seen in the United States before the 2008-09 crash, although he noted there had been some slowing in credit growth.

The central bank cites household debt as the biggest home-grown threat to the financial system.

Still, almost nobody is predicting a U.S.-style meltdown and recent data suggest a soft landing for the housing market.

Data earlier this week showed Canadian housing starts declined in January from December, although construction remained stronger than expected.

Also, the value of building permits taken out by contractors in December soared to a 4-1/2 year high, skewed by the condo market in Ontario.

The report on Thursday showed new home prices eased 0.2 percent in Vancouver for the third straight monthly decline in one of the country’s most costly real estate markets. Vancouver prices were 0.3 percent lower than the same month a year earlier.

The Toronto and Oshawa region and Montreal were the biggest contributors to the monthly rise in the price index, Statscan said. Prices in Toronto-Oshawa jumped 0.4 percent for a yearly increase of 6.3 percent.

Overall, prices held steady in 12 metropolitan regions in December from November, rose in seven and fell in two.

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