Canada's Housing Bubble

Feb 25, 2010 Steve Ladurantaye Globe and Mail

Real Estate Reporter

It's true: Canadian house prices are increasing at an impressive clip. But the Teranet-National Bank National Composite House Price Index for December shows the advances may not be as dramatic as some economists fear.

The index tracks six Canadian cities, assigning each a certain weighting to compensate for size, determined by the average sale price of a single family home as of the latest census.

It only tracks homes that have been sold at least twice and doesn't count any sale that is too far above or below the average change in price. The higher the discrepancy, the less weight the sale carries in the monthly data. The numbers are then smoothed out over three months to prevent temporary spikes.

Its method yields a 5.2-per-cent price gain in December, 2009, over December, 2008, compared with the Canadian Real Estate Association's 19-per-cent gain (CREA includes all of the monthly sales made through its Multiple Listing Service, with large cities lumped in with tiny villages).

December price gain, year over year

Vancouver: 5.1%

Toronto: 7.1%

Montreal: 5%

Calgary: 0.1%

Ottawa: 6.2%

Halifax: 2.9%