07/14/2014 12:18 EDT | Updated 09/13/2014 05:59 EDT

Canadian home prices up 4.5% with surge in big cities

Canadian home prices rose 4.5 per cent in June compared to a year earlier, but the pace of home price inflation slowed to its lowest rate in six months, according to the Teranet-National Bank national composite house price index.

Year on year prices had risen at a rate of 4.6 per cent in May nationwide. For the month, the Teranet price index was up 9.9 per cent.

There were large variations across the country in the rise in prices of single-family resale homes with the large urban markets seeing the strongest surge in prices.

Calgary prices were up 8.1 per cent compared with a year ago, Hamilton prices were up by 7.3 per cent and Toronto and Vancouver housing was 6.1 per cent more expensive.

But there were more modest gains of 1.7 per cent in Victoria, three per cent in Montreal and 3.5 per cent in Edmonton, compared to a year earlier.

Oversupply in Ottawa, Halifax

Prices in Ottawa-Gatineau fell by 1.7 per cent, while Quebec City prices were down 2.4 per cent compared to a year ago.

Randall Bartlett, a senior economist at TD Bank, said there was an oversupply of homes in Quebec City, Ottawa and Halifax, leading to falling prices.

The surge of house resale activity that normally takes place in the spring led to a strong pace of sales in June.

But Bartlett said there were signs the market might slow later in the year.

“With the housing market having now shaken off the winter blues, price are continuing to rise at a solid pace. That said, the continued deceleration in price growth on a year-over-year basis may be an indication that the Canadian housing market is becoming more balanced,” he wrote in a note to investors.

“We expect to see the cooling trend continue through the end of 2015. This view is premised on rising prices encouraging strong growth in new listings while the number of newly competed housing units remain elevated, both of which will boost supply and weigh on prices. At the same time, interest rates are likely to grind higher in Canada, resulting in reduced affordability,” he said.