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Vancouver is benefiting from low interest rates, good job growth and an influx of offshore money into its high-end homes.STAFF/Reuters

For the first half of the year, Canada's housing market has been a tale of just two cities: There's Toronto and Vancouver, and then there is everywhere else.

This week brings several new data releases on the housing market, including July existing home sales updates from the Canadian Real Estate Association and Teranet-National Bank of Canada House Price Index, along with figures for new home sales and housing starts from Statistics Canada. All are expected to show more of the same trend that has dominated the national housing picture this year: strong growth in Toronto and Vancouver, with home prices rising far more modestly, or even falling, in other regions.

The Teranet-National Bank house price index "could show a seventh straight monthly increase, buoyed by likely gains in hot markets such as Toronto and Vancouver," National Bank Financial said in a report last week.

The Real Estate Board of Greater Vancouver reported sales of existing homes in the region soared 30 per cent in July compared with the same time last year, pushing up benchmark prices more than 11 per cent. The Toronto Real Estate Board said home sales rose 8 per cent to hit a new July record last month and prices jumped 9.4 per cent for the year.

Yet despite big price gains in Toronto and Vancouver, the overall annual pace of average home price growth across the country likely slowed to 4.6 per cent in July, down from 5.1 per cent in June, National Bank said, as weak markets outside of Ontario and B.C. begin to drag down the national averages.

With low oil prices hurting housing markets in Alberta, Saskatchewan and Newfoundland, and weak economic growth dragging down markets in Quebec and the Maritimes, a larger question looms: How long can the party last in B.C. and Ontario?

Vancouver is benefiting from low interest rates, good job growth and an influx of offshore money into its high-end homes, said real estate broker Bill Binnie. "If somebody had asked me a year ago what prices were going to do, I would have said they're going to stay the same, they can't go up. And they went up 15 per cent," Mr. Binnie said. "How can prices go up further? Certainly all the factors that caused them to go up are still in place, so I sure don't see them coming down."

Several economic forecasts, however, predict that housing markets will begin to cool in both Vancouver and Toronto toward the end of the year and into next year, as a lack of affordability pushes buyers out of the market in Vancouver and rising inventory of new condos in Toronto helps put the brakes on Toronto's overheated market.

Vancouver home resales are expected to fall 12 per cent next year, Toronto-Dominion Bank forecast in a report last week, while in Toronto, existing home sales could fall by 5 per cent.

Both markets have benefited from strong employment that has been drawing people out of the oil-sensitive regions such as Alberta, TD economist Diana Petramala said. A 0.55-percentage-point fall in five-year mortgage rates between January and April after the Bank of Canada first cut interest rates also helped boost housing markets in Toronto and Vancouver during the first half of this year. But a second central bank rate cut last month hasn't had the same impact on mortgage rates.

A more likely scenario is that Canadian mortgage rates begin to rise over the next 18 months as the U.S. Federal Reserve increases interest rates, possibly as early as September, helping to cool the country's two most expensive housing markets. "Toronto and Vancouver, given how lofty prices are right now, have become more vulnerable to even small changes in interest rates," Ms. Petramala said.

Even so, few expect that a slowdown in Toronto and Vancouver will presage a housing correction. TD expects prices in both cities will keep inching upward next year, albeit at a slower pace. Vancouver in particular is prone to cyclical booms and busts as quickly rising home prices eventually push more first-time buyers out of the market. "Prices [in Vancouver] are growing at a double-digit pace right now, but if we use history as a guide, its very unlikely that will be sustained into 2016," Ms. Petramala said.

That should work to slow the overall pace of growth in the national housing market next year. The Canadian Real Estate Association forecasts that national average prices will end the year 5.2 per cent higher, but will grow by just 1.7 per cent next year, driven by weaker growth in Ontario and B.C. and a modest rebound in Alberta's housing market.