Cool-down

Home sales across Canada fall 6.7 per cent, big­gest monthly drop in seven years

The Guardian (Charlottetown) - - BUSINESS -

Home sales in June posted their largest monthly drop in seven years, driven by a plunge in the Greater Toronto mar­ket, the Cana­dian Real Es­tate As­so­ci­a­tion said Mon­day, the lat­est ev­i­dence that a cool-down in the hous­ing sec­tor is tak­ing hold.

Trans­ac­tions last month were down 6.7 per cent com­pared with May on a na­tional ba­sis, the third con­sec­u­tive monthly de­cline, with the Greater Toronto Area reg­is­ter­ing a 15.1 per cent drop.

Home sales are down 14.1 per cent from the record level set in March.

“Changes to On­tario hous­ing pol­icy made in late April have clearly prompted many home­buy­ers in the Greater Golden Horse­shoe re­gion to take a step back and as­sess how the hous­ing mar­ket ab­sorbs the changes,” CREA chief econ­o­mist Gre­gory Klump said in a state­ment.

“The re­cent in­crease in in­ter­est rates could re­in­force a lack of ur­gency to pur­chase or, al­ter­na­tively, move some buy­ers off the side­lines be­fore their pre-ap­proved mort­gage rate ex­pires. In the mean­time, some move-up buy­ers who pre­vi­ously pur­chased a home be­fore first sell­ing may be­come more mo­ti­vated to re­duce their ask­ing price rather than carry two mort­gages.”

Sales were down from the pre­vi­ous month in 70 per cent of all lo­cal mar­kets mea­sured by CREA, in­clud­ing the Lower Main­land in B.C., Mon­treal and Que­bec City.

The On­tario gov­ern­ment moved ear­lier this year to cool the Toronto real es­tate mar­ket, bring­ing in more than a dozen mea­sures in­clud­ing a 15 per cent tax on for­eign buy­ers. Since then, sales in Canada’s largest city have slowed.

Separately, mort­gage in­ter­est rates have started to rise in re­cent days. That came af­ter the Bank of Canada raised its key in­ter­est rate last week by 25 ba­sis points to 0.75 per cent, a move that prompted the big banks to in­crease their prime rates. Rates for new fixed-rate mort­gages also ticked up in an­tic­i­pa­tion of the cen­tral bank rate hike.

Com­pared with a year ago, na­tional home sales in June were down 11.4 per cent.

TD Bank econ­o­mist Diana Pe­tra­mala said that af­ter grow­ing this year, home prices are ex­pected to fall next year.

“Much of that weak­ness will be con­cen­trated in mar­kets in On­tario and B.C., where house­holds are par­tic­u­larly sen­si­tive to higher mort­gage rates given the stretched af­ford­abil­ity,” Pe­tra­mala wrote in a note to clients.

“Else­where in the coun­try, the im­prov­ing eco­nomic con­di­tions should help off­set some of the im­pact of grad­ual in­ter­est rate hikes, with home prices and sales ex­pected to trend higher.”

The na­tional av­er­age price for a home sold in June was $504,458, up 0.4 per cent from a year ago. Ex­clud­ing Greater Van­cou­ver and Greater Toronto, the na­tional av­er­age price was $394,660, up 5.8 per cent.

The ag­gre­gate com­pos­ite Mul­ti­ple List­ing Ser­vice home price index for June was up 15.8 per cent com­pared with a year ago.

CP PHOTO

A “For Sale” sign is shown in front of west-end Toronto homes Sun­day, April 9. Home sales in June posted their largest monthly drop in seven years, driven by a plunge in the Greater Toronto mar­ket, the Cana­dian Real Es­tate As­so­ci­a­tion said Mon­day, the lat­est ev­i­dence that a cool-down in the hous­ing sec­tor is tak­ing hold.

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