Canada's most expensive housing markets are becoming even pricier

Canadian existing home sales accelerated in May, with sales up 3.1% from 2.3% in April. National home sales are now at their highest level in more than five years. Sales rose in 60% of local markets, led by the Greater Toronto Area, Calgary, Edmonton, Ottawa and Montreal.

Housing report shows Canada's most expensive housing markets becoming even pricier. Meanwhile, data for the rest of Canada paints a much more modest picture. Toronto and Vancouver remain the hottest markets in the country.

The drop in mortgage interest rates so far in 2015 has provided stimulus to the housing market. Another factor that may have played a role in May sales was an increase in mortgage insurance premiums for buyers with less than a 10% down payment, effective June 1. So sales in May might have in part reflected a rush to buy ahead of the higher premiums.

"Looking ahead, given the increase in government bond yields recently - which influence mortgage rates -mortgage rates could move higher later this year, dampening demand in Canada's housing market. Overall, though, we expect the regional divide to continue. While sales in oil-related markets of Edmonton and Calgary have risen off their Jan lows, price gains remain modest. The Vancouver and Toronto markets should cool slightly on higher interest rates, however. Given the tightness in these markets, prices should remain relatively strong. Overall we expect house price gains in Canada to cool in 2016 to around 2-3%." said TD Economics in a report