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A for sale sign sits on the lawn of a Vancouver home. (DARRYL DYCK For The Globe and Mail)
A for sale sign sits on the lawn of a Vancouver home. (DARRYL DYCK For The Globe and Mail)

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Toronto house price growth could soon top Vancouver's Add to ...

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A 'tug of war' Canadian home sales climbed 2.7 per cent in September from a month earlier, illustrating what economists see as a balanced market with no signs of a bubble about to burst.

"September’s increase reflects strengthened activity in a number of major markets, led by Toronto," the Canadian Real Estate Association said today. "The monthly increase pushed national sales to its highest level since recently tightened mortgage regulations dampened sales earlier this year."

Average prices didn't change all that much, but now sit 6.5 per cent above where they were a year ago. That's down from a 9.3 per cent pace in July, largely because of the "downshift" in Vancouver, said Robert Kavcic of BMO Nesbitt Burns.

Price growth in Vancouver has been running at 10.6 per cent year-over-year, Mr. Kavcic said, less than half the rate of a few months ago.

"Toronto, however, has seen a steady 9 per cent year-over-year pace since April, and could well jump ahead of mighty Vancouver next month," he said in a report.

"There are a few reasons for the relative shift: Vancouver valuations (relative to income) had blown well ahead of those in Toronto; sales have cooled more sharply since the spring in Vancouver; supply is much tighter in Toronto."

For Mr. Kavcic's research, see the accompanying infographic click here.

Overall, the market continues to appear healthy as low mortgage rates and lower unemployment offset consumer uncertainty and tighter mortgage rules, Mr. Kavcic said, adding sales and prices should cool off the next year, but homeowners should still expect a soft landing.

Economist Sonya Gulati noted that so far this year, sales hit their peak in January, and sales are down 2.6 per cent since then. New mortgage rules, heightened economic uncertainty and a "growing saturation" of first-time buyers have had a dampening effect, offset by continued low interest rates.

"Going forward, we anticipate a tug-of-war action to take hold in the Canadian real estate market between low interest and mortgage rates and only modest economic, income and employment growth," Ms. Gulati said. " With both push and pull momentum, we expect both prices and sales to hold fairly steady, relative to current levels, over the next year."

Read more from Mike Babad's top stories: Related contentToronto house price growth could soon top Vancouver’s

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