A real estate sold sign is shown outside a house in Vancouver. (Jonathan Hayward/The Canadian Press)

Home sales in Canada dip to lowest level in 3 years: CREA

Canadian Real Estate Association says January activity was down in 75% of local markets

Canadian home sales fell 14.5 per cent between December and January, marking the lowest sales level in three years as the housing market was hit last month by a double whammy of tighter mortgage rules and lending rate hikes.

Data released by the Canadian Real Estate Association Thursday suggested that January activity was down in three-quarters of all local markets and virtually all major urban areas, especially in Ontario’s hot spot in the Greater Golden Horseshoe. The decline was less significant on an annual basis, with sales falling 2.4 per cent.

Sales climbed to a record monthly high in December, according to CREA’s figures, ahead of the stress test that requires all potential buyers qualifying for a mortgage to show that they can manage interest rate increases.

“The decline in January sales provides clear evidence that the strength in activity late last year reflected a pull-forward of transactions, as rational homebuyers hurried to purchase before mortgage rules changed in 2018,” said Gregory Klump, the association’s chief economist.

The federal banking regulator introduced tougher rules for uninsured mortgages beginning Jan. 1 and require a stress test for borrowers with a more than 20 per cent down payment. They now have to prove that they can service mortgage at a qualifying rate of the greater of the contractual mortgage rate plus two percentage point or the five-year benchmark rate published by the Bank of Canada.

The January market also dampened due to the Bank of Canada’s decision to raise interest rates to 1.25 per cent, up from one per cent. It was the bank’s third increase since last summer, following hikes in July and September.

The central bank’s interest rate increase impacts variable rate mortgage holders, but those who opt for fixed mortgages also saw a rise in the five-year fixed rate amid rising bond yields and a stronger economy.

CREA noted that January home sales are on par with the 10-year monthly average and that a large decline in new listings prevented the market balance from shifting in favour of homebuyers. The average price of a home rose by 2.3 per cent when compared with last year at just over $481,500.

The national sales-to-new listings ratio was 63.6 per cent in January. A ratio reading above 60 per cent generally indicates a sellers’ market.

The number of newly-listed homes plunged 21.6 per cent from December 2017 to January 2018 — the lowest level since spring 2009. About 85 per cent of all markets had fewer listings. The Greater Toronto Area led the decline, with large percentage drops also in British Columbia’s Lower Mainland, Vancouver Island and the Okanagan region, as well as parts of Ontario.

“The piling on of yet more mortgage rule changes that took effect starting New Year’s Day has created homebuyer uncertainty and confusion,” said CREA President Andrew Peck in a statement.

“At the same time, the changes do nothing to address government concerns about home prices that stem from an ongoing supply shortage in major markets like Vancouver and Toronto. Unless these supply shortages are addressed, concerns will persist.”

Aleksandra Sagan, The Canadian Press

Just Posted

Snowy Mountain fire travelling away from communities

The Snowy Mountain fire near Keremeos remains at 13,359 hectares in size

Highway 3A pot plant pulls application

A controversial cannabis production facility has withdrawn an application

Man dies in Penticton RCMP custody

An independent investigation is underway after a man died while in Penticton police custody Aug. 16

Olalla fire grows to 50 hectares

A wildfire near Olalla is currently not threatening and structures

Armed Forces in town, two new fires near Cherryville

Area restrictions expanded, firefighters equipment stolen

Kim XO is Black Press Media’s fashionista

Starting Sept. 7, stylist Kim XO will host Fashion Fridays on the Life channel on Black Press Meida

Ash falling in the Okanagan

Reports on social media of ashes on cars around the Okanagan

Kelowna Drag King rocks out into the spotlight

Suiting up in leather and spikes, to compete alongside the Queens

Minister optimistic after 2 days of Columbia River Treaty negotiations

Canadian and U.S. officials met in Nelson Wednesday and Thursday to discuss future of the treaty

RCMP appeal for tips, dashcam footage in German tourist shooting west of Calgary

The Durango crashed into the ditch after the shooting near the Goodstoney Rodeo Centre

2 nurses attacked at B.C. psych hospital, union calls for in-unit security

PHSA says that in-unit guards would do more harm than good

Former Shuswap optician won’t be jailed for sexually assaulting minor

Kenneth Pilkington sentenced to 24 months’ probation for offence three decades ago

Kelowna developer warns home buyers to look at more than the price tag

Kelowna developer Jeffrey Anderson wants first-time homeowners to look at more than the price tag.

Red Cross now accepting donations for those impacted by B.C. wildfires

The Canadian Red Cross is asking for help now and in the weeks and months ahead.

Most Read