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 in a statement.
The updated forecast came as CREA 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 more than $496,000, down 6.4 per cent from a year ago. Excluding the Greater Toronto and Greater Vancouver areas, the average price was just more than $391,100, down 2 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 activity in March and April were down 22.7 per cent and 13.9 per cent, respectively, according to CREA numbers.
The speculation is the Blue Jays will trade star reliever Roberto Osuna, writes Rosie DiManno. He is currently on paid leave from baseball as he faces allegations of domestic violence.
Why I have pity for Roberto Osuna
Banksy’s Trolley Hunters, a print of which was stolen in Toronto this week.
Banksy print ‘Trolley Hunters’ stolen from Toronto exhibition
Combined sales for the three-month period fell to a nine-year low, CREA said Friday.
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 twenty per cent down payment is continuing to suppress sales activity,” said CREA President Barb Sukkau, in a statement. “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 2 percentage points higher than the contractual mortgage rate or the central bank’s five-year 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, reflecting the higher borrowing costs associated with a recent rise in government bond yields.
“This year’s new stress-test became even more restrictive in May, since the interest rate used to qualify mortgage applications rose early in the month,” said Gregory Klump, CREA’s chief economist, in a statement Friday. “Movements in the stress test interest rate are beyond the control of policy-makers. Further increases in the rate could weigh on home sales activity at a time when Canadian economic growth is facing headwinds from U.S. trade policy frictions.”
CREA’s latest figures support the notion that markets are stabilizing after the volatility at the beginning of 2018 related to the tightened mortgage rules introduced on Jan. 1, said TD economist Rishi Sondhi.
“On balance, this was a better-than-expected report. Sales were effectively flat during the month — their best turnout so far this year. Meanwhile, listings increased for the third time in four months, pointing to somewhat improved confidence on the part of sellers as prices edged higher for the second straight month.”
The Canadian Press