Property sales down in Canada for third month in a row and prices largely flat

National home sales in Canada fell by 6.7% from May to June and are now 11.4% below where they were a year ago with the market seeing interest rates rising.

The average sale price was almost flat, up just 0.4% in June year on year, according to the data from the Canadian Real Estate Association (CREA).

It is the largest monthly decline in sales since June 2010 and the third month in a row that sales have decreased and activity is now some 14.1% below the record set in March.

The index shows that sales were down from the previous month in 70% of all local markets, led overwhelmingly by the Greater Toronto Area (GTA). Monthly declines were also posted in all surrounding Greater Golden Horseshoe housing markets, the Lower Mainland of British Columbia, Kingston, Montreal and Quebec City.

Year on year there was a significant drop in sales in the GTA and half of all local housing markets recorded annual sales declines. But some did not, most notably Calgary, Edmonton, London and St. Thomas, Ottawa, Montreal and Halifax-Dartmouth.

‘Canadian economic and job growth have been improving, which is good news for housing demand. However, it also means that interest rates have begun to rise, which may impact home buyer confidence, particularly in pricier markets like Toronto and Vancouver where recent housing policies had already moved potential buyers to the side lines,’ said CREA president Andrew Peck.

However, CREA believes that in lower priced markets, the effect of higher interest rates on housing affordability will be relatively muted. ‘Changes to Ontario housing policy made in late April have clearly prompted many homebuyers in the Greater Golden Horseshoe region to take a step back and assess how the housing market absorbs the changes,’ said Gregory Klump, CREA’s chief economist.

‘The recent increase in interest rates could reinforce a lack of urgency to purchase or, alternatively, move some buyers off the side lines before their pre-approved mortgage rate expires. In the meantime, some move-up buyers who previously purchased a home before first selling may become more motivated to reduce their asking price rather than carry two mortgages,’ he added.

The number of newly listed homes slid 1.5% in June, led by a sizeable fall in the GTA compared to record levels in April and May. A number of other markets in the Greater Golden Horseshoe also saw a decline in new supply.

Prices fell in all housing categories, led by single family homes. Apartments recorded the largest year on year gains in June with growth of 20.4%) followed by townhouse/row units up 17.4%, two storey single family homes up 15.4% and one storey single family homes up 12.3%.

Benchmark home prices in the Lower Mainland of British Columbia have been recovering after having dipped in the second half of last year, the index report points out but price falls are expected to continue.

Benchmark price gains slowed on a year on year basis in Greater Toronto, Guelph, and particularly in Oakville-Milton but remain well above year ago levels at 25.3%, 25.4% and 17.4% respectively. In Calgary benchmark prices remained slightly positive, up 0.6% year on year, while in Regina and Saskatoon home prices fell by 0.7% and 3.1% year on year.

The actual, not seasonally adjusted, national average price for homes sold in June 2017 was $504,458, up just 0.4% from where it stood a year ago and the data shows that it continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which are two of Canada’s most active and expensive housing markets. Excluding these two markets, the national average price is $394,660.