Property market slump in Canada sees annual price growth down and sales unchanged
The property market in Canada seems to be in a slump with the latest figures showing that sales were unchanged from April to May and nationally prices are down 6.4% year on year.
Sales edged downward by 0.1% month on month and 16.2% year on year to the lowest level for national sales activity in more than five years, according to the data from the Canadian Real Estate Association (CREA).
At the same time as sales are falling, the supply of properties for sale is rising, up 5.1% from April to May, the data also shows.
The average price in May was $496,000 nationally but the figures reveal that the national price is skewed by sales in the GVA and GTA regions, two of Canada’s most active housing markets.
Apartments saw the largest year on year growth with a rise of 12.7% in May with townhouses up 4.9%. But prices for one storey homes fell by 1.5% and were down 4.7% for two storey family homes.
Excluding the GTA and GVA markets from calculations cuts more than $104,000 from the national average price to just over $391,100 and trims the year on year decline of 6.4% to 2%.
Slightly more than half of all local housing markets reported fewer sales in May compared to April, led by the Okanagan region, Chilliwack and the Fraser Valley, together with the Durham region of the Greater Toronto Area (GTA) and Quebec City.
However, declines in activity were offset by gains in Calgary, Thunder Bay, Brantford, London and St. Thomas, Oakville-Milton and the Quinte Region west of Kingston. There was also a small increase in GTA sales.
‘The stress-test that came into effect this year for home buyers with more than a 20% down payment is continuing to suppress sales activity. But the extent to which it is side lining home buyers varies among housing markets and price ranges,’ said CREA president Barb Sukkau.
According to CREA chief economist Gregory Klump the new stress test became even more restrictive in May, since the interest rate used to qualify mortgage applications rose early in the month.
‘Movements in the stress test interest rate are beyond the control of policy makers. Further increases in the rate could weigh on home sales activity at a time when Canadian economic growth is facing headwinds from US trade policy frictions,’ he added.
The number of months of inventory is another important measure for the balance between housing supply and demand. It represents how long it would take to liquidate current inventories at the current rate of sales activity.
There were 5.7 months of inventory on a national basis at the end of May 2018. While this marks a three-year high for the measure, it remains near the long term average of 5.2 months.
The CREA report explains that the falling annual price growth largely reflect trends among Greater Golden Horseshoe (GGH) housing markets tracked by the index. While home prices in the region have stabilised and begun trending higher on a monthly basis, rapid price gains recorded one year ago have contributed to deteriorating year on year price comparisons. ‘If recent trends remain intact, year on year comparisons will likely improve in the months ahead,’ it adds.