Brokers may have to brace themselves for further slowdown in home sales, according to a new report from Royal LePage, pointing to real signs that correction is underway.
“We had predicted this cyclical change early in the year, a natural market reaction after a period of strong expansion," Phil Soper, president and chief executive of Royal LePage, said Wednesday. "Changes to mortgage regulations, which took effect on July 9, accelerated the correction.”
The fact is homebuyers appear to be holding off on new purchases as the market gets acclimatized to the new regulations. Still, for the time being, prices are still going up, he said.
In the Q3 House Price Survey released by Royal LePage today, the average house price in Canada has increased year-over-year, up anywhere between1.8 per cent and 4.8 per cent. The price for a two-story home has risen to $403,747, up 4 per cent from this time last year. The largest increase came from detached bungalows, the average price currently sitting around $366,773.
The slowing of the market in light of the changes to mortgage rules put in place in July was not totally unexpected, Soper said.
“A drop in the number of homes trading hands typically precedes a period of softening house prices,” he said. “Where there is reduced demand, those who want to sell their homes adjust their asking price to stimulate interest.”
Decreased activity in the first-time home buyer sector has contributed heavily to the reduced sales, adds Soper. First-time buyers typically represent one third to one half of all sales, but with prices soaring and lending restrictions tightening, their absence from the market is strongly felt.
Those Canadians still hoping to purchase around the mortgage rules will likely opt for neighbourhoods other than their first choice, or smaller properties.
The market that saw the strongest increase across bungalows, two-story homes and condominiums was St. John’s, with an increase of 9.9 per cent, 8.2 per cent and 9.2 per cent respectively.