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The real estate mar­ket in Canada is show­ing signs of recov­ery but ana­lysts are warn­ing that it will be slow.

A rise in mort­gage rates and high unem­ploy­ment are just two of the fac­tors that are likely to hold back prices and sales.

Prop­erty experts say that although first-time buy­ers and Bank of Canada rate cuts have helped restore sta­bil­ity to a mar­ket that slumped from late 2008 to early this year cau­tion is still needed.

‘We should be less fear­ful than we were six months ago, but I don’t think we should be exu­ber­ant yet. The resale mar­kets in Canada are very strong. May fig­ures were pretty good, and June num­bers will be even bet­ter,’ said Will Dun­ning, an eco­nomic con­sul­tant who spe­cial­izes in the hous­ing market.

‘But by July and into the fall there will be an off­set of con­sid­er­ably slower activ­ity. I don’t think it’s likely to go off a cliff. It’ll depend on what hap­pens in employ­ment and the broader econ­omy, and how that affects con­fi­dence,’ he added.

Indeed the lat­est data from the Cana­dian Real Estate Asso­ci­a­tion sug­gest that Canada’s res­i­den­tial prop­erty mar­ket, which has with­stood the finan­cial cri­sis much bet­ter than its hard-hit US neigh­bour, has been show­ing signs of improve­ment for sev­eral months.

May resale home prices rose 0.4% to $319,757, top­ping the pre­vi­ous record set a year ear­lier and the first year-over-year increase since May last year. Also sales activ­ity climbed for the fourth month in a row.

The asso­ci­a­tion, which rep­re­sents more than 97,000 real estate bro­kers and agents, now expects sales activ­ity to con­tinue improving.

Philip Soper, chief exec­u­tive offi­cer of Brook­field Real Estate Ser­vices, an arm of Cana­dian prop­erty giant Brook­field Prop­er­ties, expects a period of sta­bil­i­sa­tion over the next year.

Unem­ploy­ment is one of the biggest dan­gers for the recov­ery. The job­less rate increased to an 11 year high in May.

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1. Cana­dian hous­ing mar­ket not in recov­ery yet
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3. Irre­sistible rates drive Canada’s recovery
4. Cor­rec­tion, not crash for Cana­dian real estate mar­ket in 2009
5. Five signs a hous­ing recov­ery is on the way