Canadian home sales dropped 2.9% in April compared to March while actual activity was down almost 14% year-over-year to a 7-year low.
The Canadian Real Estate Association says the impact of OFSI’s B-20 mortgage lending guideline change implemented at the start of the year, is starting to affect regions that where cooling isn’t needed.
“This year’s new stress test has lowered sales activity and destabilized market balance for housing markets in Alberta, Saskatchewan and Newfoundland and Labrador Provinces,” said Gregory Klump, CREA’s Chief Economist. “This is exactly the type of collateral damage that CREA warned the government about. As provinces whose economic prospects have faced difficulties because they are closely tied to those of natural resources, it is puzzling that the government would describe the effect of its new policy as intended consequences.”
Activity was below year-ago levels in about 60% of all local markets, led overwhelmingly by the Lower Mainland of British Columbia and by markets in and aroundOntario's Greater Golden Horseshoe (GGH) region.
New listings were down 4.8% but with lower sales inventory rose to 5.6 months of supply, the highest since September 2015.
The Aggregate Composite MLS® Home Price Index was up 1.5% y-o-y in April 2018 marking one full year of decelerating y-o-y gains. It was also the smallest y-o-y increase since October 2009.
Deceleration was driven by a stabilization of home prices in Ontario’s Greater Golden Horseshoe region following a rapid rise a year ago.
Disappointing but no major shocks ahead says TD economist
The decline in national home sales and activity is “disappointing” says TD Economics’ Rishi Sondhi.
However, in his note, he does not foresee any major issues ahead for Canada’s housing market.
“Going forward, we anticipate these factors will continue to weigh on activity and sentiment,” he wrote. “Having said that, we don't expect the outsized declines in activity that were observed in the first quarter to be repeated in most places except for B.C., where these factors will continue to be further exacerbated by the recently introduced provincial regulation, intended to cool activity in some higher priced markets.”
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