A real estate sold sign is shown outside a house in Vancouver. (Jonathan Hayward/The Canadian Press)

Home sales in Canada dip to lowest level in 3 years: CREA

Canadian Real Estate Association says January activity was down in 75% of local markets

Canadian home sales fell 14.5 per cent between December and January, marking the lowest sales level in three years as the housing market was hit last month by a double whammy of tighter mortgage rules and lending rate hikes.

Data released by the Canadian Real Estate Association Thursday suggested that January activity was down in three-quarters of all local markets and virtually all major urban areas, especially in Ontario’s hot spot in the Greater Golden Horseshoe. The decline was less significant on an annual basis, with sales falling 2.4 per cent.

Sales climbed to a record monthly high in December, according to CREA’s figures, ahead of the stress test that requires all potential buyers qualifying for a mortgage to show that they can manage interest rate increases.

“The decline in January sales provides clear evidence that the strength in activity late last year reflected a pull-forward of transactions, as rational homebuyers hurried to purchase before mortgage rules changed in 2018,” said Gregory Klump, the association’s chief economist.

The federal banking regulator introduced tougher rules for uninsured mortgages beginning Jan. 1 and require a stress test for borrowers with a more than 20 per cent down payment. They now have to prove that they can service mortgage at a qualifying rate of the greater of the contractual mortgage rate plus two percentage point or the five-year benchmark rate published by the Bank of Canada.

The January market also dampened due to the Bank of Canada’s decision to raise interest rates to 1.25 per cent, up from one per cent. It was the bank’s third increase since last summer, following hikes in July and September.

The central bank’s interest rate increase impacts variable rate mortgage holders, but those who opt for fixed mortgages also saw a rise in the five-year fixed rate amid rising bond yields and a stronger economy.

CREA noted that January home sales are on par with the 10-year monthly average and that a large decline in new listings prevented the market balance from shifting in favour of homebuyers. The average price of a home rose by 2.3 per cent when compared with last year at just over $481,500.

The national sales-to-new listings ratio was 63.6 per cent in January. A ratio reading above 60 per cent generally indicates a sellers’ market.

The number of newly-listed homes plunged 21.6 per cent from December 2017 to January 2018 — the lowest level since spring 2009. About 85 per cent of all markets had fewer listings. The Greater Toronto Area led the decline, with large percentage drops also in British Columbia’s Lower Mainland, Vancouver Island and the Okanagan region, as well as parts of Ontario.

“The piling on of yet more mortgage rule changes that took effect starting New Year’s Day has created homebuyer uncertainty and confusion,” said CREA President Andrew Peck in a statement.

“At the same time, the changes do nothing to address government concerns about home prices that stem from an ongoing supply shortage in major markets like Vancouver and Toronto. Unless these supply shortages are addressed, concerns will persist.”

Aleksandra Sagan, The Canadian Press

Just Posted

Wetaskiwin liquor store robbed Feb. 21

Two suspects arrested after store employee threatened with bear spray

Vehicle and oversize load collide near South Cooking Lake turnoff

Strathcona County RCMP respond to serious injury collision on Hwy#14

Questionable reffing is becoming the NHL norm

Perhaps mandatory eye tests would help boost officials’ capabilities

Wetaskiwin Friendship Center gains momentum

Wetaskiwin city council reinforces its support behind Friendship Center

Just stop the political correctness stupidity

Seriously, stop ‘peoplekind,’ leave the anthem alone

WATCH: Red Deer celebrates one year out from 2019 Canada Games

Community gathers at Great Chief Park to commemorate Games milestone

How to keep local news visible in your Facebook feed

Facebook has changed the news feed to emphasize personal connections. You might see less news.

Man accused in death of Winnipeg teen Tina Fontaine not guilty

Raymond Cormier was accused of killing Indigenous 15-year-old and dumping her body in the Red River

Canadian support split on Trans Mountain pipeline debate: Poll

Angus Reid poll surveying Canadians on pipeline stance finds no clear winner

Student protest outside White House a snapshot of American gun debate

Demonstrators take part in a student protest for gun control legislation in front of the White House

Feds can’t do much to fight fake news in Canada

Federal government can’t do much to fight fake news: Canadian Heritage documents

Canada’s Boutin wins silver in women’s 1,000 short track

Women’s 1,000-metre short-track speedskater Kim Boutin wins silver the Pyeongchang Winter Olympics Thursday

Alberta takes out full-page ads in B.C. over strained relationship

It’s the latest move between the two provinces over progress on Trans Mountain pipeline expansion

Toddler swept away in Ontario floods

Toddler missing as flooding forces thousands from their homes in Ontario

Most Read