The Canadian Real Estate Association released its August statistics today, which revealed that home sales across Canada declined for a fourth straight month.
Home sales were down 3.1 per cent from July 2016, which is the largest monthly decline since December 2014. The decrease in sales activity was true for almost 60 per cent of housing markets across the country, most pronounced in the Greater Vancouver area, which has been slowing since February.
“The sudden introduction of the new property transfer tax on homes purchased by foreign buyers in Metro Vancouver has created a cloud of uncertainty among home buyers and sellers,” said CREA president Cliff Iverson. “That the tax applies to sales that had not yet closed shows how the details for a new tax policy can unnecessarily destabilize housing markets. More broadly, it speaks to the importance of evidence-based decision making to ensure that unintended consequences and collateral damage are minimized when new policies or tighter regulations affecting housing markets are being actively considered.”
“Single family homes sales were already cooling before the new land transfer tax on foreign home buyers in Metro Vancouver came into effect,” said Gregory Klump, CREA’s chief economist. “The surprise announcement of the new tax caused sales to brake hard.”
In spite of the monthly declines, actual sales activity (as in, that which hasn't been seasonally adjusted) in August was 10.2 per cent greater than it was for August 2015, and increases in sales from August 2015 were reported in 3/4 of Canadian housing markets. Greater Toronto led the rise, while Greater Vancouver posted the largest year-over-year sales decline.
The number of newly listed homes also declined 2.7 per cent from July. This statistic is most pronounced in the Lower Mainland region of British Columbia, Greater Toronto, and Montreal, although new supply was down in slighlty more than half of all local markets.
Home prices, reflected in the MLS® Home Price Index (HPI), rose 14.7 per cent from August 2015, and the actual national average price (again, not seasonally adjusted) for homes sold in August 2016 was $456,722, up 5.4 per cent from August 2015. It's the smallest increase since January 2015. These figures are led by -- no surprise here -- activity in Greater Vancouver and Greater Toronto. Without those two markets, the average home price is $357,033.
Prices for both two-storey single family homes and townhouses/row homes posted a 16.3 per cent year-over-year increase from August 2015. One-storey single family homes showed an increase of 14.4 per cent, and apartment unit prices rose 11.7 per cent.
9 of the 11 housing markets tracked by the MLS® HPI posted year-over-year price gains in August, with the exception of Calgary, which showed a decrease of 4.1 per cent, and Saskatoon, which is down .9 per cent.
The national average home price is forecast to rise by 10.1 per cent to $487,800 in 2016, with a 9.2 per cent increase in B.C. to $695,000 and a 12.7 per cent increase in Ontario to $524,600. Average prices are expected to rise by 9.3 per cent in Prince Edward Island, by 1.6 per cent in Manitoba, and by 2.1 percent in both Quebec and New Brunswick. Annual home average prices in Alberta, Saskatchewan and Nova Scotia are projected to remain stable, and Newfoundland and Labrador's average price is expected to decline by 6.4 per cent.
In 2017, the national average price is forecast to ease by .2 per cent to $486,600, with modest price gains near or below inflation in most provinces apart from B.C., which is forecast to see a decline of about 2 per cent.
Sales activity is forecast to rise by 6.0 per cent to 535,900 units in 2016, a new record for annual sales. Prince Edward Island is forecast to post the largest annual percentage increase in sales this year at 20.1 per cent, accompanying British Columbia, Manitoba and Ontario in setting a new annual sales record in 2016.
Year-over-year average price gains have continued to climb in Ontario and B.C., and even though prices and sales seem to be trending down in B.C., a lack of supply in many Ontario housing markets is projected to keep the increase in sales activity this year fairly moderate at 7.1 per cent. B.C. is still forecast to post the largest annual increase in activity this year, at 14.6 per cent. Home sales are forecast to rise 5.3 per cent in Manitoba, 5.2 per cent in Quebec, 2.8 per cent in New Brunswick, and 3.1 per cent in Nova Scotia.
In 2017, sales are forecast to ease slightly in New Brunswick, Nova Scotia, and Prince Edward Island.
In terms of provinces where housing markets are tied to natural resource industries, Alberta is expected to record a decline of 8.8 per cent, the largest annual decline in activity in 2016. Saskatchewan follows at a 6.1 per cent decline. Newfoundland and Labrador is forecast to register a 1.2 per cent increase in activity. The sales forceast for Alberta's sales forecast reflects better than expected activity during the second quarter and some momentum entering the third quarter, but CREA notes that this activity may not last into 2017.
In 2017, national sales are forecast to number 532,900 units, representing a decline of .6 per cent from projected activity this year. Transactions in B.C. and Ontario are expected to remain strong but remain under this year's record levels due to dwindling affordability and a lack of supply for single family homes. Sales in B.C. are forecast to decline by 4 per cent, while sales in Ontario are forecast to decline by 1 per cent. Sales activity is forecast to continue rising in Manitoba by 2.8 per cent and in Quebec by 1.8 per cent.
A sales-to-new listings ratio between 40 and 60 per cent is generally consistent with balanced housing market conditions, and the national ratio was 61.6 per cent, smililar to what it was in July but slightly down from what it was at the beginning of the summer, which was 65.3 per cent. In Vancouver, the ratrio was at 90 per cent at the beginning of the year, and is now down to the mid-50 per cent range.
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