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For the second consecutive month, housing prices in Montreal reached their highest level on record in July, according to the Teranet-National Bank House Price Index.

The index, which tracks the resale price of homes, rose 1.63 per cent in the Montreal Census Metropolitan Area from June to July.

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It was up 3.25 per cent from July 2016.

The increase in prices is being driven by increased sales, buoyed by a strengthening labour market and a decline in new listings, said Marc Pinsonneault, a senior economist at the National Bank of Canada.

Given those conditions, the price increases aren’t surprising, he said.

However, there were predictions that changes made to mortgage loan insurance rules last fall — which were intended to ensure that buyers would be able to afford their mortgage payments if interest rates rose — would slow growth.

“People were fearing that first-time buyers will be put on the sidelines and the market would soften again in Montreal, but just the opposite happened. Maybe the regulation did have some effect, but it was dwarfed by the behaviour of the labour market,” Pinsonneault said. “There’s been quite a turnaround in Quebec on that front, especially in Montreal.”

The index, which uses June 2005 as a base, reached 159.4 for the Montreal area in July. That means prices have risen 59.4 per cent since June 2005.

It was 156.84 in June. The previous high was July 2016, when the index reached 154.38.

jserebrin@postmedia.com