In the wake of a noticeable drop in existing home sales last month, the Canadian Real Estate Association (CREA) pointed at the possibility of a significant slowdown in the flurry of activity now reigning over the country’s real estate markets.
In a Financial Post
report by Garry Marr, the latest CREA numbers showed a 2.8 per cent decline (on a month-over-month basis) in May sales, and predicted that overall sales activity next year would increase by only 0.2 per cent, after a possible 6.1 per cent growth by the end of 2016.
“National sales activity and average prices reached new heights in the first half of 2016 amid a growing supply shortage of single-family homes in British Columbia and Ontario, particularly in B.C.’s Lower Mainland as well as in and around the Greater Toronto Area,” CREA announced in its news release.
“The long-awaited cooling of Canada’s housing market may be finally at hand,” Royal Bank
of Canada senior economist Robert Hogue agreed.
A likely contributing factor to the phenomenon is the increasing number of people who are hesitating to put their homes for sale as they couldn’t yet afford new properties in the current price environment.
“At some point, the stretch in affordability is going to start weighing on the demand side, but it’s clear affordability is now affecting the supply side first and causing people to stay put,” Hogue explained. “Only time will tell. When you look at market conditions in Canada’s two hot markets, it is still very, very tight.”
Another possible roadblock to next year’s market performance would be sales volume in British Columbia and Ontario, which is projected to decline and remain static, respectively.
“In these two provinces, luxury sales activity is anticipated to recede from current levels, resulting in a decline in their share of total sales activity,” CREA stated.
“This suggests a lack of supply may be starting to rein in sales amid a continuation of strong housing demand,” CREA chief economist Gregory Klump added. “The proportion of sales above that is just not predicated to rocket ever higher.”