Photo: James Bombales
The first quarter of 2018 saw month after month of year-over-year sales declines for the Canadian housing market. But could things have finally steadied, according to one economist.
“March’s uptick in home purchases implies some bottoming out of sales activity following the imposition of tougher mortgage rules on January 1,” writes Scotiabank economist Marc Desormeaux, in a recent note.
National home sales fell another 22.7 per cent year-over-year in March, but inched up 1.3 per cent month-over-month, a trend that Desormeaux says could continue heading into the second quarter.
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“Canadian home sales volumes are forecast to decline by 5-10 per cent this year before stabilizing at what would still be historically high levels in 2019,” he writes. “Following the first quarter contraction, we anticipate a modest but broad-based recovery in sales activity [in the second quarter].”
The reason for the warming of the market? Desormeaux points to buyers and sellers adjusting to new mortgage rules, along with other strong economic fundamentals.
“Low unemployment rates, strengthening wages and rising immigration point to still-strong underlying housing demand,” he writes.
It’s a sentiment shared by TD senior economist Michael Dolega, who writes in a recent note that less expensive markets will likely balance out quicker than their pricier counterparts.
“Canadian housing markets are likely to remain under-pressure from the recent new mortgage rules, higher mortgage rates and, in some cases, provincial regulation,” he writes. “However, lower-priced markets where affordability is good should generally outperform in the current environment.”
As for prices, they also seem to be on their way up, at least in certain segments of the market.
“Price trends are being affected by changes in the composition of home purchases. Amid acute affordability pressures, homebuyers in BC and Greater Golden Horseshoe are increasingly purchasing lower-cost apartments and townhomes,” writes Desormeaux.
That means that while the national average sale price fell 10.4 per cent year-over-year in March, as buyers sought out less expensive property types, the aggregate MLS Home Price Index jumped 4.6 per cent year-over-year.
“The [housing price index] reflects the shift towards more affordable housing types, with torrid price gains for these units in both high-cost regions driving the national trend,” writes Desormeaux.