Home sales plunge 22.7%, prices down 10% in March

Result of policies to cool hot housing markets

The number of Canadian homes sold in March plunged nearly 23 per cent and the national average price was down 10 per cent from the same month last year amid double-digit plunges in most housing markets across the country, according to the latest monthly sales data released Friday.

The Canadian Real Estate Association said the level of sales activity marked a four-year low for the month of March and was seven per cent below the 10-year average. Still, national home sales were up from the previous month by 1.3 per cent, according to CREA’s statistics.

The drop in home sales comes after several government policy measures were implemented to cool the country’s hot housing market. Last March, national home sales activity reached an all-time record for that month, according to CREA.

Recent changes to mortgage regulations which make it harder for homebuyers to qualify for uninsured mortgages are fuelling demand for lower-priced homes, while shrinking the pool of qualified buyers for higher-priced homes, said Gregory Klump, CREA’s chief economist.

“Given their limited supply, the shift of demand into lower price segments is causing those sale prices to climb,” he said. “As a result, ‘affordably priced’ homes are becoming less affordable while mortgage financing for higher priced homes remains out of reach of many aspiring move-up home buyers.”

Apartment units posted the largest year-on-year price gains in March, up 17.8 per cent, followed by townhouse/ row units at 9.4 per cent. Onestorey single family homes saw price gains in March of just 1.3 per cent, and twostorey single family home prices were down two per cent from a year ago.

As of Jan. 1, homebuyers with a down payment larger than 20 per cent seeking a mortgage from a federally regulated lender are now subject to a financial stress test. These borrowers now have to prove that they can service their uninsured mortgage at a qualifying rate of the greater of the contractual mortgage rate plus two percentage point or the five-year benchmark rate published by the Bank of Canada.

The new policy reduces the maximum amount buyers will be able to borrow to buy a home. An existing stress test already requires those with insured mortgages to qualify at the Bank of Canada benchmark fiveyear mortgage rule.

Overall, the national average price for all types of residential property slipped to about $491,000, down 10.4 per cent from March of last year — with the Vancouver and Toronto markets causing most of the drag.