Suspect data driving up Canadian home prices -report


Oct 11 (Reuters) - A national database which estimates theworth of houses may contain errors that have fueled inflation inthe Canadian property market, where a steady rise in home priceshas fanned fears of a bubble, a newspaper reported.

Banks, appraisers and mortgage insurers are increasinglyconcerned about the database, run by the nation's biggestmortgage insurer, Canada Mortgage and Housing Corp, the Globeand Mail said in a report on its website late Wednesday.

Home prices have soared in Canada, raising concerns of amarket crash, and making the housing market a key risk to thecountry's financial outlook.

Statistics Canada data shows that new home prices in Canadawere up 0.2 percent in August for a 17th straight month-on-monthincrease. August prices were up 2.4 percent from a year ago.

Dubbed Emili, the automated system uses data, such as fromthe recent sale of nearby homes, to set values, without havingan appraiser sent to the address. The potential margin of errorin making these calculations could cause problems forhomebuyers, homeowners and banks, the paper said.

The report cited federal documents containing confidentialstatements from industry players, which indicated the data isflawed and has driven up home prices, the Globe and Mail said.

Those documents were part of a review by the federal bankingregulator, the Office of the Superintendent of FinancialInstitutions, to see if Canada's mortgage lending rules had tobe tightened, the paper said.

In June, Finance Minister Jim Flaherty announced stricterrules on lending in a bid to cool the housing market.

Lenders are relying too much on the database, which wasintroduced by the CMHC in 1996 to help banks determine how muchmoney can be lent for a residential property, the paper said.

(Reporting by S. John Tilak; Editing by Bernadette Baum)