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

Terrace Northmen earn third place in rugby provincials

The two-time reigning champs took home the bronze medals this year

Interest high for local elections in Terrace and area

City council, regional district and school district seats contested

Open burning bans lifted in northwest B.C.

Only campfires are allowed within Terrace city limits

New RCMP Inspector named for Terrace detachment

Inspector Jayson Lucash transferring in from Prince George

12 and 17-year-old Block boys take first at The Northern View Cannery Road Race

Approximately 150 people competed in 10 events after one year hiatus

B.C. tent city ‘devastated’ after flash flood

Maple Ridge mayor says that residents shouldn’t have to return to their flooded tents

Volunteer crew ready to build ramps for B.C. amputee

Jean Moulton will soon have an easier time getting in and out of her home.

VIDEO: B.C. tour offers unique underground glimpse of generating station

About 1,250 people expected at sold-out tour on Sunday

Allegations against Kavanaugh pose test for #MeToo movement

Aside from the Ford-Kavanaugh showdown, this has been a tumultuous season for the #MeToo movement

Parents of B.C. toddler who died in unlicensed daycare sue over negligence

‘Baby Mac’ was only 16 months old when he died in a Vancouver daycare

Syrian family can, finally, feel safe after settling in B.C.

Anglican Church of the Holy Trinity White Rock meets sponsored family for the first time

1st private moon flight passenger to invite creative guests

The Big Falcon Rocket is scheduled to make the trip in 2023, SpaceX founder Elon Musk announced at an event Monday at its headquarters near Los Angeles.

‘Game of Thrones,’ ‘Mrs. Maisel’ triumph at Emmys

In a ceremony that started out congratulating TV academy voters for the most historically diverse field of nominees yet, the early awards all went solely to whites.

Korean leaders meet in Pyongyang for potentially tough talks

South Korean President Moon Jae-in began his third summit with North Korean leader Kim Jong Un on Tuesday.

Most Read