TORONTO (Reuters) – Canadian home sales climbed in February after a soft January and price gains picked up speed, confirming the country’s housing market remains buoyant and a possible concern for bubble-wary policymakers.

February existing home sales in Canada grew by 1.4 percent from a month earlier, Canadian Real Estate Association data showed on Thursday.

Sales had fallen 4.5 percent in January from December.

The industry group said sales were up 8.6 percent from a year earlier, compared with a 4 percent gain in January. The yearly numbers weren’t seasonally adjusted.

The national average home price rose 2 percent on a year-over-year basis to C$372,763 ($375,400) in February, compared with a 1.2 percent gain in January.

“The monthly jump will raise eyebrows in Ottawa, where policymakers are growing more involved in the hazards of an overshoot in home prices (and related mortgage debt) that will set Canada up for a harder landing down the street,” CIBC World Markets Chief Economist Avery Shenfeld said in a research note.

“That increases the percentages of a policy response at some point soon this year if home price momentum continues, with measures aimed directly at housing and mortgages instead of rate hikes being the likely weapon into consideration.”

Some economists and policymakers have expressed concern that the housing market is entering bubble territory in certain cities. Toronto and Vancouver are most often mentioned.

Finance Minister Jim Flaherty has tightened mortgage rules several times in a bid to maintain the market from overheating. A Reuters poll last month showed a majority of forecasters expect Flaherty to tighten rules again this year.

Canada’s housing market was supported by record low mortgage rates offered by most major lenders, including recent high-profile deals from Bank of Montreal and Royal Bank of Canada.

Not all economists were worried by the most recent numbers, with some noting that activity and cost gains have slowed from their post-recession surge.

“If you take a look at the long term trend, it’s still pointing towards a gentle moderation,” said Mazen Issa, macro strategist at TD Securities.

Issa said the housing market is unlikely to suffer a severe correction unless the Bank of Canada aggressively hikes its main policy rate, now at 1 percent. The central bank seriously isn’t expected to head until next year

Issa added that rate increases would likely must be done gradually so as to not shock the economy.

“Once rates start to go up again you should ponder whether households could be capable of service that debt,” he said.

HOUSEHOLD DEBT RATIO EASES

Flaherty and Bank of Canada Governor Mark Carney have both warned repeatedly about soaring household debt levels, cautioning Canadians to organize for an era of better rates.

But a separate report out Thursday suggested the matter has eased slightly.

Statistics Canada said the ratio of household credit market debt – including mortgages, consumer credit and loans – fell to 150.6 percent of income inside the final quarter of last year from a record 151.9 percent within the third quarter.

Canadians continued to extend their debt load inside the period to C$1.6 trillion from C$1.58 trillion within the previous quarter, but their personal disposable income grew at a faster pace, Statscan said.

National net worth increased within the fourth quarter by 0.8 percent to C$6.6 trillion, resulting from higher non-financial assets, and household net worth per capita increased to C$182,100 from C$180,600.

($1=$0.99 Canadian)

(Additional reporting By Claire Sibonney and Louise Egan; Editing by Jeffrey Hodgson and Rob Wilson)