It seems that recent good news regarding the Canadian real estate market wasn't an isolated incident, as new data shows home prices are on the rise.
According to the Teranet-National Bank house price index, home prices increased 2 percent overall on a year-over-year basis during May. This comes after a 2 percent gain in home prices during April, creating a pattern of slow but steady growth.
Seven of the 11 cities across the country tracked by the index saw prices moving up above the national average. Quebec City saw a rise of 6.5 percent, while Calgary and Hamilton each saw an increase of 5.8 percent. Winnipeg saw prices rise 4.6 percent, Edmonton experienced an increase of 4 percent and Toronto showed gains of 3.9 percent.
On a month-over-month basis, prices rose 1.1 percent during May.
Month-over-month gains were led by Calgary, which saw a 2.3 percent increase in home prices when compared to April. According to Richard Cho, senior market analyst in Calgary for the Canada Mortgage and Housing Corporation, this increase can be attributed to limited inventory.
"The decline in active listings has played a part in the rise in prices," he said. "Homes on average are taking less time to sell compared to 2012, and a number of homes are also receiving multiple offers."
Other cities that saw month-over-month price increases include: Edmonton (1.9 percent), Hamilton (1.4 percent), Montreal (1.2 percent), Winnipeg (1.2 percent), Ottawa-Gatineau (1.1 percent) and Toronto (1 percent).
This represented the ninth time in 15 years of data collection that May home prices were up 1 percent or more on a national average from the previous month.
Construction increases along with prices
In addition to rising home prices, data from the CMHC shows that housing construction is increasing as well. The seasonally adjusted annual rate for housing starts during May was 200,178 units. This represents a considerable increase from 175,922 units during April.
Once again the Calgary area was leading the nation, with Alberta's new home construction levels at a five-year high during May. CMHC data showed that total housing starts in Calgary reached 1,078 during this time period, up from 949 during the same time last year.
"While softer energy prices may be moderating overall economic growth this year, it appears that home builders didn't receive the memo," said Todd Hirsch, chief economist at ATB Financial. "Judging by the most recent statistics, it's boom time in Alberta."
No housing bubble for Canada
Finally, in an interview with The Wall Street Journal that will likely leave industry observers breathing a little easier, Angel Gurria, the secretary-general of the Organization for Economic Co-operation and Development, said that Canada is in no danger of a housing bubble forming.
"The housing market has been building very steadily over a period based on growth, jobs, good income, and a Canadian economy that's been in good shape," he said. "Frankly, it's not a bubble in the sense of great big speculation in the property. I think there will be a cull in some investment in the sector, which will see prices stabilize over time."
With construction increasing, it's likely that home prices will fall accordingly. However, it appears that the country's ultra-low mortgage rates are trending toward a rise, meaning it's more important than ever for potential homebuyers to take advantage of low interest while they can. For Canadians looking to purchase a home, the time to borrow is now.