CREA fore­casts 5.3% slide in Canada hous­ing sales this year

The Globe and Mail (Atlantic Edition) - - REPORT ON BUSINESS WEEKEND - JANET McFAR­LAND

Na­tional real es­tate group at­tributes de­clines largely to On­tario

The Cana­dian Real Es­tate As­so­ci­a­tion has cut its short-term fore­cast for home sales in Canada in 2017 and 2018 ow­ing to slow­ing ac­tiv­ity in ma­jor On­tario cities, in­clud­ing Toronto.

The num­ber of houses sold in Canada is ex­pected to drop 5.3 per cent this year af­ter post­ing a 6.4per-cent in­crease last year. CREA says the trend will con­tinue in 2018 with 2.3 per cent fewer houses ex­pected to change hands.

The de­clines come mostly from lower fore­casts for On­tario, where the num­ber of homes sold is ex­pected to be down 10.3 per cent this year and 5.9 per cent next year. Hous­ing-mar­ket re­forms have led to a rapid cool­ing in sales in the Greater Golden Horse­shoe re­gion – a broad swath of South­ern On­tario sur­round­ing Toronto – from a record pace in 2016.

“Be­cause the re­gion is home to a quar­ter of the Cana­dian pop­u­la­tion, changes in sales ac­tiv­ity there have a large in­flu­ence on re­sults for the prov­ince and na­tion­ally,” CREA said.

Al­berta is ex­pected to lead Cana­dian prov­inces for sales growth in 2017, with CREA fore­cast­ing to­tal home sales will be up 7.4 per cent over 2016 as the Calgary mar­ket strength­ens. How­ever, CREA ex­pects the pace to slow in 2018 with sales fall­ing 0.4 per cent from the stronger base this year.

De­spite the sales slow­down in On­tario this year, CREA fore­casts av­er­age prices in the prov­ince will be up 8.7 per cent this year, largely ow­ing to ma­jor price gains recorded ear­lier in 2017. Prices are ex­pected to be down 1.1 per cent in 2018 as the mar­ket flat­tens, CREA said.

Av­er­age prices in Bri­tish Columbia are fore­cast to grow 2.2 per cent this year and re­main un­changed in 2018, while Que­bec is ex­pected to see prices rise 4.5 per cent in 2017 and 3.2 per cent in 2018 as prices in the Mon­treal re­gion con­tinue to climb. Av­er­age prices in Al­berta will be up mod­estly by 1.2 per cent in 2017 and 0.6 in 2018, CREA said.

On a na­tional ba­sis, home prices are ex­pected to in­crease an av­er­age of 3.4 per cent in 2017 but fall 0.6 per cent in 2018. The trend is sim­i­lar to a fore­cast from Moody’s An­a­lyt­ics ear­lier this week, which also pre­dicted solid growth in home prices this year fol­lowed by mod­est soft­en­ing in 2018, although Moody’s sees ma­jor cities in On­tario fac­ing grow­ing house prices over the next five years, while other ma­jor cities in Canada are ex­pected to have flat or fall­ing prices on a five-year ba­sis.

CREA has low­ered its fore­casts sig­nif­i­cantly since June be­cause of the im­pact on sales in the Toronto re­gion from new hous­ing mea­sures an­nounced by the On­tario gov­ern­ment in April, in­clud­ing a 15-per-cent tax on for­eign buy­ers. CREA said the changes “side­lined more buy­ers than was pre­vi­ously an­tic­i­pated.”

Av­er­age home prices in the Greater Toronto Area (GTA) fell more than 20 per cent be­tween April and Au­gust af­ter peak­ing at record highs be­fore the hous­ing mea­sures were an­nounced. CREA said ac­tiv­ity “has be­gun to show ten­ta­tive signs of sta­bi­liz­ing” across the Greater Golden Horse­shoe re­gion, which in­cludes the GTA.

In Au­gust, for ex­am­ple, home sales in the GTA climbed 14 per cent com­pared with July on a sea­son­ally ad­justed ba­sis, CREA said.

“Time will tell whether the monthly rise in Au­gust sales ac­tiv­ity marks the be­gin­ning of a re­bound, par­tic­u­larly in the Greater Golden Horse­shoe re­gion and other higher-priced ur­ban cen­tres,” CREA chief econ­o­mist Gre­gory Klump said in a state­ment.

How­ever, the as­so­ci­a­tion said the ad­di­tional pres­sures from tougher mort­gage rules and ris­ing in­ter­est rates “will con­tinue to lean against hous­ing mar­ket ac­tiv­ity” for the rest of 2017 and into 2018. The as­so­ci­a­tion said its fore­casts could fall fur­ther de­pend­ing on the pace of fu­ture in­ter­est-rate in­creases.

“Ad­di­tional rate in­creases and fur­ther tight­en­ing of mort­gage reg­u­la­tions rep­re­sent down­side risks to the sales fore­cast, while im­prov­ing Cana­dian eco­nomic fun­da­men­tals rep­re­sent up­side risks,” the fore­cast said.

Bank of Mon­treal econ­o­mist Ben­jamin Reitzes said the size of in­crease in Toronto sales in Au­gust was sur­pris­ing, but sur­round­ing re­gions around Toronto “were very much a mixed bag.” How­ever, he said it ap­pears the hous­ing mar­ket may be sta­bi­liz­ing af­ter the ini­tial de­cline, and “the worst may have passed.”

Also Fri­day, Statis­tics Canada re­ported av­er­age house­hold credit-mar­ket debt com­pared with dis­pos­able in­come rose to a record-high level of 167.8 per cent in the sec­ond quar­ter of 2017. That means for ev­ery dol­lar of dis­pos­able in­come, house­holds in Canada had $1.68 in debt, in­clud­ing con­sumer credit and mort­gage loans.

Mr. Reitzes said the slow­ing hous­ing mar­ket should flat­ten growth in the debt-to-dis­pos­able in­come ra­tio dur­ing the sec­ond half of the year, how­ever.

“House­hold bal­ance sheets de­te­ri­o­rated some­what, but re­main healthy over all, although ris­ing in­ter­est rates will be a chal­lenge,” he said in a re­search report.

Time will tell whether the monthly rise in Au­gust sales ac­tiv­ity marks the be­gin­ning of a re­bound, par­tic­u­larly in the Greater Golden Horse­shoe re­gion and other higher-priced ur­ban cen­tres. Gre­gory Klump CREA chief econ­o­mist

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.