National Post

HOME SALES POST BIGGEST MONTHLY DROP IN 7 YEARS.

Deals fall 6.7% May to June

- Craig Wong

• 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. With GTA figures excluded, national sales dropped 5.0 per cent.

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. Home sales overall 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.”

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.

That has had a dramatic impact on the Toronto area as average prices are down 14.2 per cent since March — the fastest three- month decline in the history of the data back to 1988 — while the ratio of sales to new listings sits at its lowest level since 2009.

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. Sales fell most sharply in Regina, which was down 27.3 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.”

Bank of Montreal economists Doug Porter and Robert Kavcic expect Toronto to follow Vancouver’s path — price adjustment at the top of the market with less impact at lower prices. Meanwhile, cities like Montreal and Ottawa look strong.

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.

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