July marked a first for the Canadian housing market this year: monthly home sales declined from levels seen during the same month a year earlier.
To be exact, the number of homes changing hands last month via multiple listing service (MLS) systems fell 2.9 per cent from what was recorded in July 2015, according to data released today by the Canadian Real Estate Association (CREA).
The last time a year-over-year drop in activity occurred was in January 2015. However, the most recent decline is the biggest since April 2013, says CREA, which also noted sales declined by 1.3 per cent from June marking the third consecutive month-over-month drop.
While the pace of transactions slackened year-over-year in about 60 per cent of all local Canadian markets, Greater Vancouver, the Fraser Valley, Calgary and Edmonton led the way in declines.
Gregory Klump, CREA’s chief economist, explains possible reasons for the slowdown in Greater Vancouver, the country’s most expensive major market.
“Home sales continued to trend lower while price gains further accelerated in the Lower Mainland of British Columbia,” says Gregory Klump, CREA’s chief economist, in a statement.
“This suggests that sales are being reined in by a lack of inventory and a further deterioration in affordability,” Klump continues.
Klump notes how the BC government’s new 15 per cent tax on foreign buyers only came into effect on August 2nd, so its impact is not yet clear.
Referring to the latest figures, Robert Kavcic, senior economist at BMO, says “the real eye-catcher is the fact that mighty Vancouver has been largely responsible for the recent cooling, with seasonally-adjusted sales now falling in five straight months, albeit from gaudy record levels at the turn of the year.”
In a separate response to the CREA data, Diana Petramala, a TD Bank economist, says the bank expects Vancouver home sales to take a further 14- to 20-per-cent hit as a result of the tax.
“Not only as foreign buyers leave the market, but as domestic players get spooked and move to the sidelines,” she clarifies.
The levy applies to foreign nationals and corporations buying residential properties anywhere in Metro Vancouver.
At a time when home sales sagged in a majority of Canada’s local markets, the benchmark price of a Canadian home continued to climb year-over-year in July.
It reached $570,500 last month, which represents an increase of about 14.3 per cent from the same time last year.
Greater Vancouver remained most expensive, with a benchmark price of $930,400, up about 32.6 per cent compared to July 2015.
Meantime, Greater Toronto, the country’s largest market by sales volume, saw benchmark prices reach $656,000, up approximately 16.7 per cent compared to a year earlier.
Of the 11 major markets CREA’s MLS Home Price Index tracks, only Calgary and Saskatoon experienced price drops in July.
The benchmark price of a Calgary home was $435,500, down about 4.2 per cent year-over-year, while in Saskatoon it slumped to $309,000, having fallen roughly 1.5 per cent from a year ago.
“Overall, average home prices are expected to rise at a double-digit pace this year yet again, even as the regional story shifts,” says Petramala, the TD economist.
“Next year, moderately rising interest rates and new capital requirements for big banks may lift the cost of borrowing and take some steam out of housing activity,” she adds.