Canada’s housing market saw another so-called payback sales drop in February, when the national average home price slumped by 5% from a year ago, after a surge in sales late last year from homebuyers looking to purchase ahead of this year’s new mortgage rules.
The latest monthly figures from the Canadian Real Estate Association showed that sales volume was down 16.9% in February compared with a year ago, and down 6.5% compared with January.
February’s home sales decline marked the second consecutive month-over-month decline and the lowest reading in nearly five years, the national association said.
“The drop off in sales activity following the record-breaking peak late last year confirms that many homebuyers moved purchase decisions forward late last year before tighter mortgage rules took effect in January,” CREA chief economist Gregory Klump stated, as quoted by The Canadian Press.
The stricter residential mortgage lending regulations introduced by the Office of the Superintendent of Financial Institutions were aimed at reducing risk in the market amid high housing prices.
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The widespread pattern of declines was yet another indication that the regulatory changes, and not local market conditions, were behind softer sales activity, RBC economist Josh Nye said.
“The roller coaster ride that was Canada’s housing market in 2017 has continued this year with resales posting another sizeable decline in February,” Nye explained in a research note.
“While the give-back related to the pull-forward in activity experienced late last year, as buyers rushed to close deals prior to the updated B20 rules, appears to have been largely complete in January, the softness in sales nonetheless persisted this month,” TD economists Michael Dolega and Rishi Sondhi added in their research note. “We believe that much of it has to do with lingering uncertainty, with additional regulations introduced in the B.C. budget adding further tensions, along with B20 impacts and rising rates.”
The national average house price for homes sold in February 2018 was just over $494,000, down 5% from a year earlier. Excluding Toronto and Vancouver, the national average price was just under $382,000, up 3.3% from $369,728 a year ago.
The number of newly listed homes in February increased by 8.1%, following a plunge of more than 20% in the month prior. However, new listings across the country in February were still 6.4% below the 10-year monthly average and 14.6% below the peak reached in December 2017. New home listings in February were also below the levels recorded every month last year except January 2017.
TD’s Dolega and Sondhi pointed to these listings as some of the “modestly encouraging details” in the latest CREA report. “New listings also perked up a little during the month, suggesting rising confidence on the part of sellers after recent B-20-related volatility.”
The duo is expecting sales activity to stabilize sometime in mid-2018.
“We look for prices to drop, on average, this year, though balanced-market conditions across much of the country should mitigate the magnitude of the decline,” they wrote. “We expect conditions to improve next year, with price growth returning to the market alongside a rise in transaction activity.”