Stress tests still impacting property market in Canada with sales and prices down

Home sales in Canada fell almost 3% month on month in April while prices have also been falling, down over 11% year on year, the latest national index shows.

About 60% of all local housing markets reported fewer sales, led by the Fraser Valley, Calgary, Ottawa and Montreal with transactions down overall by 2.9%, according to the figures from the Canadian Real Estate Association (CREA).

The data also shows that year on year activity was down 13.9% and hit a seven year low for the month of April. It also stood 6.9% below the 10 year average for the month.

Prices fell 11.3% year on year to just over $495,000 and have been declining in recent months, although the index report points out that rapid prices gains in some markets a year ago have contributed to the slowing growth figures.

But the national average price is heavily skewed by sales in the Greater Vancouver Area and Greater Toronto Area, two of Canada’s most active and expensive markets. Excluding these two markets from calculations takes the average price fall to 4.1% and the average price to just under $386,100.

According to CREA the stress test that came into effect this year for home buyers with more than a 20% down payment is casting a shadow over sales activity but its impact on housing markets varies by region.

‘This year’s new stress test has lowered sales activity and destabilized market balance for housing markets in Alberta, Saskatchewan and Newfoundland and Labrador Provinces,’ said Gregory Klump, CREA’s chief economist.

‘This is exactly the type of collateral damage that CREA warned the Government about. As provinces whose economic prospects have faced difficulties because they are closely tied to those of natural resources, it is puzzling that the Government would describe the effect of its new policy as intended consequences,’ he added.

The index also shows that the number of newly listed homes fell by 4.8% in April, reaching a nine year low for the month and new listings stood 12% below the 10-year monthly moving average.

A breakdown of the figures shows that the biggest annual prices gain was for apartments with growth of 14.7% with townhouses up 6.5%, but prices one storey homes fell by 1.1% and for two storey homes prices were down by 4.8%.

Home prices in the Lower Mainland of British Columbia continue to trend upward after having dipped briefly in the second half of 2016, In Greater Vancouver they increased by 14.3% year on year and in Fraser Valley by 22.7%.

Prices in the Greater Toronto Area fell by 5.2% year on year but the report points out that this reflects rapid price gains recorded a year ago and masks recent month on month price gains in this market.

In Calgary and prices were again little changed on a year on year basis, up 0.1% and down 0.9% respectively while prices in Regina fell by 6.5% and in Saskatoon they were down by 3.4%.

Prices increased by 8.4% year on year in Ottawa, led by a 9.4% increase in two storey home prices. They also increased by 6.3% in Greater Montreal, led by a 7.3% increase in two storey home prices and by 4.2% in Greater Moncton, led by a 5.6% increase in one storey home values.