Home sales across Canada register biggest monthly decline since 2012

OTTAWA (CP) — Home sales across the country dropped sharply last month, driven by a plunge in the Greater Toronto Area after Ontario imposed a tax on foreign buyers aimed at cooling the red-hot market.

The number of residential properties sold nationwide fell by 6.2 per cent in May compared to April, the largest month-to-month decline since August, 2012, the Canadian Real Estate Association said this week. The industry group, which represents real estate agents, brokers and salespeople in Canada, noted sales were down a whopping 25.3 per cent month-over-month in the GTA.

The data showed that while real estate may be local, the impact of changes in a market the size of Toronto can have a sweeping effect nationally.

“This is the first full month of results since changes to Ontario housing policy made in late April. They provide clear evidence that the changes have resulted in more balanced housing markets throughout the Greater Golden Horseshoe region,” CREA chief economist Gregory Klump said in a statement.

Ontario’s government introduced more than a dozen measures, including a 15 per cent tax on foreign buyers, aimed at stabilizing Toronto’s blistering housing market.

Sal Guatieri, a senior economist with BMO Capital Markets, said while the rules have had an effect, they merely brought back “some semblance of normalcy after a manic winter” that will likely be short-lived.

“Given the strong economic, demographic and financial backdrop, don’t expect the GTA market to stay down for the count,” Guatieri said in a note to clients. “Policy tinkering will do little to cool demand on a sustained basis. Time to take out the heavy artillery: higher interest rates. The ball is now firmly in the Bank of Canada’s court.”

The Bank has dropped hints that the era of historically low interest rates may be coming to an end. Governor Stephen Poloz said this week that cuts to the benchmark rate have “done their job,” a statement that some market watchers have interpreted as a sign that a hike could be six to 12 months away.

In the closely watched Vancouver market, sales were up by 22.8 per cent month-overmonth. There are concerns that the city may be returning to bubble territory less than a year B.C. instituted a tax on foreign buyers of properties in the Lower Mainland.

Nationally, the average price for all homes sold last month was $530,304, pulled up by Toronto (863,910) and Vancouver ($1,110,376).