Canadian home sales gain ground in September

OTTAWA — The number of homes sold in September climbed in Canada for the second month in a row after a slowdown this year that was led by a cooling in the Toronto market.

The Canadian Real Estate Association said Friday that sales through its Multiple Listing Service in September were up 2.1 per cent compared with the previous month. The increase followed a 1.3 per cent increase in August.

The increase in sales in September was led by gains in Greater Vancouver and Vancouver Island, the Greater Toronto Area, London and St. Thomas, Ont., and Barrie, Ont.

Compared with a year ago, sales in September were down 11 per cent as the number of homes sold were down in close to three-quarters of all local markets.

The national average price for homes sold in September was just over $487,000, up 2.8 per cent from a year ago. Excluding Greater Vancouver and Greater Toronto, the average price was about $374,500.

TD Bank senior economist Michael Dolega said that, unlike the gain in August, which was driven by Toronto, the increase for September was more widespread.

But he said rising interest rates and coming regulatory changes, including a potential new stress test for borrowers with uninsured mortgages, could impinge on the housing market.

“Having said that, after some near-term weakness, likely to last into mid-2018, activity should begin to rebound thereafter given the fundamentally supported demand related to strong job growth and strengthening wage dynamics,” Dolega wrote in a note to clients.

Home sales in Canada had been slowing this year following changes by the Ontario government aimed at cooling the Toronto market.

CREA noted that sales in September were down almost 12 per cent from the record set in March before Ontario announced its housing plan.

The Bank of Canada has raised its key interest rate target twice this year, driving the big bank prime rates and the cost of variable-rate mortgages higher. The costs of new fixed-rate mortgages are up as yields on the bond market have also risen.

Meanwhile, the Office of the Superintendent of Financial Institutions is finalizing new lending guidelines.

Among the changes being considered is a requirement that homebuyers who do not require mortgage insurance would still have to show they can make their payments if interest rates rise.