Forecast for Canada home sales slips again

May sales down 16.2 per cent from one year ago as B.C. and Ontario lead decline

OTTAWA — The Canadian Real Estate Association is lowering its national home sales forecast for this year due to weaker sales in B.C. and Ontario.

The industry association which represents about 100,000 real estate agents across Canada said Friday it now expects home sales this year to fall 11 per cent compared with a year ago to 459,900 units this year. The prediction compared with a forecast for a 7.1 per cent decline the association released in March.

“The decrease almost entirely reflects weaker sales in B.C. and Ontario amid heightened housing market uncertainty, provincial policy measures, high home prices, ongoing supply shortages and this year’s new mortgage stress test,” the association said.

The updated forecast came as the national association reported actual home sales in May hit a seven-year low as they fell 16.2 per cent compared with a year ago.

The national average price for homes sold in May was just over $496,000, down 6.4 per cent from a year ago.

Excluding the Greater Toronto and Greater Vancouver areas, the average price was just over $391,100, down two per cent.

This drop in sales activity capped off a lacklustre spring home-buying season, as March, April and May are typically the most active months in any given year. National home sales activ- ity in March and April were down 22.7 per cent and 13.9 per cent, respectively, according to the agency’s numbers.

Combined sales for the threemonth period fell to a nine-year low.

Factors weighing on home sales include new government measures introduced in British Columbia and Ontario, such as a foreign buyers tax, as well as interest rate hikes by the Bank of Canada.

The association on Friday again pointed the finger at a new stress test introduced at the beginning of the year for uninsured mortgages, which has cut the amount that certain homebuyers are able to qualify for.

“The stress test that came into effect this year for homebuyers with more than a 20 per cent down payment is continuing to suppress sales activity,” said CREA president Barb Sukkau. “The extent to which it is sidelining home buyers varies among housing markets and price ranges.”

As of Jan. 1, the Office of the Superintendent of Financial Institutions requires buyers who don’t need mortgage insurance to prove they can make payments at a qualifying rate of the greater of two percentage points higher than the contractual mortgage rate or the central bank’s fiveyear benchmark rate.

The bar was raised even higher in May when the central bank’s five year benchmark rate rose from 5.14 per cent to 5.34 per cent.

The Bank of Canada uses the posted five-year fixed mortgage rates at the Big Six banks to calculate the benchmark rate.

The central bank’s benchmark rate increased, in turn, after all the Big Six banks raised their posted five-year fixed mortgage rates in the preceding weeks.