Canadian home sales register biggest monthly decline in nearly 5 years

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

May sales were down from the previous month in about half of all local markets, but the large national decline was driven by a whopping 25.3 per cent month-over-month decline in the GTA, the Canadian Real Estate Association said Thursday. Activity was down across the Greater Golden Horseshoe region in southern Ontario, including Oakville, Milton, Hamilton Burlington and Barrie.

The number of residential properties sold nationwide fell by 6.2 per cent in May compared to April, the largest month-to-month decline in nearly five years, CREA said. The Ottawa-based industry group represents real estate agents, brokers and salespeople in Canada.

“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 (GGH) region,” CREA chief economist Gregory Klump said in a statement.

CREA said it is revising downward its forecast for housing sales in Ontario following provincial measures to cool the market.

Ontario introduced a 16-point plan to cool the market with measures that included a 15 per cent nonresident speculation tax in the GGH and expanded rent control rules for the entire province.

“Evidence suggests that housing market sentiment has similarly cooled following housing policy changes made by the provincial government in April 2017. Trends for the province are softening, with home sales and price growth in the (GGH) region slowing,” CREA said.

Ontario’s tax change followed that of British Columbia, which introduced a 15 per cent additional property transfer tax on foreign buyers in August, 2016.

In the closely watched Vancouver market, sales were up by 22.8 per cent month-over-month.

CREA raised its forecast for sales in B.C. in 2017, which is expected to offset declines in Ontario. B.C. is still expected to see a nine per cent decline in sales in 2017.

Nationally, CREA now forecasts sales to decline 1.5 per cent in 2017 to 527,400. By 2018, sales are expected to decline another 0.8 per cent.

“Recent changes to housing policy in Ontario have quickly caused sales and listings to become more balanced in the GTA,” said Andrew Peck, president of CREA, in a statement. “Meanwhile, the balance between supply and demand in Vancouver is tightening up, while many places elsewhere in Canada remain amply supplied.”

Klump noted May was first full month of results since changes to Ontario housing policy and the evidence is clear that the GGH market conditions are now more balanced.

“For housing markets in the region, May sales activity was down most in the GTA and Oakville. This suggests the changes have squelched speculative home purchases.”

The actual national average price for homes sold in May 2017 was $530,304, up 4.3 per cent from a year ago. CREA says sales activity in Greater Vancouver and Greater Toronto continue to impact that figure. Without those two cities, the national average price is $398,546.

The national average price is set to increase by 7.4 per cent to $526,000 in 2017, led by Ontario which is expected to see a 16 per cent increase for the year which would represent a moderation from where prices are in the province yearto-date. By 2018, CREA says the national average price will increase by 1.8 per cent to $535,400.