Economists see signs of bottom after dip in home sales

Toronto and almost two-thirds of local markets across Canada led a trend in sales that pushed activity down 2.1 per cent nationally in July from the previous month, the Canadian Real Estate Association said Tuesday.

The Ottawa-based group, which represents about 100 real estate boards nationwide, said provincial government rules to cool the housing market in Ontario continue to hang over the region’s Greater Golden Horseshoe, but a Bank of Canada interest rate hike of 25 basis points last month probably pushed buyers to act.

“July’s interest rate hike may have motivated some homebuyers with pre-approved mortgages to make an offer,” said Andrew Peck, president of CREA, in a statement. “Even so, sales activity continued to soften in the GGH. Meanwhile, sales and prices in Montreal continue to strengthen.”

Municipalities around Toronto have seen a sharp drop in sales and prices following implementation of a 15-percent non-resident speculation tax in April, but there are indications the market is beginning to absorb the impact of the tax.

“July marked the smallest monthly decline in GGH home sales since Ontario’s Fair Housing Plan was announced,” said Gregory Klump, chief economist, with CREA. “This suggests sales may be starting to bottom out amid stabilizing housing market sentiment. Time will tell whether that’s indeed the case once the transitory boost by buyers with preapproved mortgages fades.”

“All eyes remain on Toronto as the correction continues to play out,” BMO Capital Markets senior economist Robert Kavcic wrote in a note. “It’s now vividly clear that policy changes, regardless of the precise number of non-resident investor transactions they’ve impacted, have worked to alter market psychology that was bordering on dangerous through 2016 and early-2017.”

Actual (not seasonally adjusted) activity in July was down 11.9 per cent from a year ago, but newly listed homes fell further by 1.8 per cent in July from June, led by the GTA.

The national average sale price was $478,696, down 0.3 per cent from a year ago.