Toronto leads slump

by Greg Quinn and Erik Hertzberg

Canadian new home prices fell for the first time since 2010 in February, led by a drop in Toronto as buyers were squeezed by higher interest rates and tougher mortgage regulations.

Prices in the nation’s largest city fell 0.6 percent, the second monthly decline and the biggest in eight years. Builders also charged the same or less across much of Toronto’s surrounding cities, an area known as the Golden Horseshoe.

Statistics Canada’s nationwide home price index declined by 0.2 percent from January, the most since June 2009 around the time of the nation’s last recession. Economists surveyed by Bloomberg predicted a 0.1 percent increase.

Toronto’s weakness is a swing from last year when policy makers stepped in to curb 30 percent price gains in resale prices, which raised concerns some buyers were taking on unsustainable mortgages. The new home price decline likely reflects a new mortgage stress test that took effect in January and a rise in lending rates, Statistics Canada said.

Those market changes may have also been a drag in western Canada.

Prices were unchanged for a second month in all three cities tracked in British Columbia including Vancouver, another city that has been the focus of concern about a housing boom.

Statistics Canada also reported declines in all four cities it monitors in the provinces of Alberta and Saskatchewan.

One bright spot was a 0.6 percent gain in Montreal. The agency’s index covers single houses and multiple-unit residences but not condominiums.

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