In the News ˙ Jun 16, 2017

National home sales fall for second consecutive month

National home sales fall for second consecutive month

The stiffer mortgage lending rules designed to cool down a red-hot residential real estate market appear to be having their intended effect, because, for the third time in the previous five months, home sales have fallen in Canada, new numbers reveal.

In May, home purchases nationwide slipped 6.2 percent compared to April, according to the Canadian Real Estate Association. Down for the second sales period in a row, the dip in buying was the largest monthly decline since 2012.

Andrew Peck, CREA president, indicated that some of the biggest differences have been observed in Ontario, where asking values have appreciated at a record-setting pace, due to high demand and limited supply.

"Recent changes to housing policy in Ontario have quickly caused sales and listings to become more balanced in the GTA," Peck explained. "Meanwhile, the balance between supply and demand in Vancouver is tightening up, while many places elsewhere in Canada remain amply supplied."

Indeed, the national sales-to-new listings ratio - which measures the direction the housing market is weighted in favor of, buyers, sellers or balanced - pulled back to 56.3 percent from April's 60.2 percent, CREA reported. This suggests that real estate conditions are in a better state of balance, whereas before, conditions were more favorable to sellers.

Gregory Klump, chief economist for the CREA, pointed out that the regulations passed by the Ontario government regarding mortgage approval are beginning to bear fruit.

"This is the first full month of results since changes to Ontario housing policy made in late April," Klump said. "They provide clear evidence that the changes have resulted in more balanced housing markets throughout the Greater Golden Horseshoe region.

Oakville and the Greater Toronto Area were the parts of Ontario that experienced the biggest alterations, Klump continued, with sales activity down compared to April.

Price hikes slow but remain elevated
Still, prices continue to rise, suggesting that the market may need additional time to become more affordable for would-be buyers. Year-over-year asking values in Greater Toronto elevated roughly 29 percent, according to the CREA's analysis. That's a slower rate than in previous months, but the typical house remains costlier today than at the same time in 2016.

BMO economist Sal Guatieri isn't convinced the updated mortgage lending rules will be a game changer.

"This merely returned sales to some semblance of normalcy after a manic winter," Guatieri said, according to CBC News. "The Ontario government's policies have temporarily returned the Toronto and Greater Golden Horseshoe housing situation from a raging seller's market to a more balanced playing field - for now."

Fair Housing Plan announced in April
In April, the Ontario government installed a 15 percent tax for home-buying residents of Canada who aren't native to the country. Part of the so-called "Fair Housing Plan," the tax also applied to non-Canadian corporations and non-permanent residents. Lawmakers are hopeful that this, along with other self-stabilizing regulation installations - such as rent control - will rein in price hikes. The typical house in the Toronto area sells for approximately $916,600. That's 33 percent more than this time last year.

Buying a place in Canada as a whole is a lot less expensive. In May, the average home set back buyers roughly $530,300, the CREA reported. Though a 4.3 percent increase from the same period last year, the average fell from April by approximately 5 percent.

Meanwhile, prospective owners in May had more listings to select from. Roughly 4.7 months of supply was on the market last month, according to the CREA's analysis. In April,  there was 4.3 months' worth of supply and 4.1 months in March.