-- Steep gains in Vancouver and Toronto drove Canadian existing home sales to the second-highest annual total on record, evidence that backs up federal government moves last month to tighten mortgage lending.
Nationally, sales of existing homes rose 5.5 percent to 506,334 in 2015, the Canadian Real Estate Association said Friday from Ottawa. The record was 2007 sales, which were 3 percentage points higher. Declines in Calgary and Edmonton, the largest cities in Alberta, which is reeling from an oil-price shock, kept a lid on national figures.
Historically low borrowing costs are fueling the boom in home sales, prompting warnings from policy makers that a correction poses risks to the financial system. Finance Minister Bill Morneau set new restrictions on mortgage lending last month, saying the measure was aimed at young families taking on large mortgages in Vancouver and Toronto.
Vancouver sales rose 28.1 percent to 43,145, and in the nearby Fraser Valley they jumped 33.5 percent to 20,055. Sales in Toronto, Canada’s largest city, rose 9.2 percent to 101,846. The average 2015 sales price increased 8.5 percent to C$442,857 ($306,475).
Those gains were more than enough to overcome declines in Alberta cities suffering from energy industry layoffs. Sales in Calgary dropped 28.6 percent to 23,994 and in Edmonton they declined 8.2 percent to 18,227, the realtor group said.
Starting Feb. 15, downpayments will double to 10 percent on the portion home prices between C$500,000 and C$1 million, according to the new measures. The threshold will remain at the current 5 percent for anything below that. Homes worth more than C$1 million, which don’t qualify for government insurance, will still require a minimum 20 percent downpayment.
Vancouver sales fell 0.3 percent to 4,052 in December from November, and in the Fraser Valley they rose 0.4 percent to 2,044. Toronto sales fell 2.1 percent to 8,670.
The year ended with a 0.6 percent sales decline for December, compared with the previous month, led by declines in Alberta. That followed two months of gains that meant fourth- quarter sales were still the highest in six years.
“December mirrored the main themes of 2015, with strong sales activity and price growth across much of British Columbia and Ontario offsetting declines in activity among oil producing regions,” CREA chief economist Gregory Klump said in the report. “Housing market prospects are unlikely to improve in the near term in regions where job market prospects are tied to oil.”