National home sales slowed for the first time in six months in September, as tougher mortgage qualification rules continue to take a bite out of buyers’ purchasing power.
The latest numbers released by the Canadian Real Estate Association (CREA) reveal sales activity fell in roughly half of all markets, dipping 0.4 per cent from August, and a heftier 8.9 per cent from the same time period in 2017.
New listings also rose 3 per cent, pushing the market into slightly softer buying conditions. Edmonton, Vancouver Island, and parts of Ontario’s Greater Golden Horseshoe experienced the greatest month-over-month declines, partly offset by booming sales in Montreal and BC’s Fraser Valley. From an annual perspective, activity has slowed most in parts of BC and the Prairie Provinces.
The national average price remained fairly flat at $487,000, an increase of 0.2 per cent, though the MLS Home Price Index rose 2.3 per cent year over year, reflecting a greater proportion of higher-priced detached home sales.
Mortgage Rules Continue to Play a Role
CREA President Barb Sukkau says the mortgage qualification hurdles put in place this January, which require all borrowers to pass an interest rate stress test, crimp home buyers’ affordability and are behind declines in some local markets; and, as interest rates are poised to rise higher this year, it’s a trend we can expect to continue.
“The balance between the number of home buyers and suitable homes varies depending on location, housing type, and price range,” she stated. “The difference in market balance will likely come into sharper focus as interest rates rise and cause this year’s new mortgage stress test to become even more restrictive.”
Better Buyer Conditions in Some Markets
There remains a mix of buyers’ and sellers’ markets throughout the nation, as a 3-per-cent uptick in new listings impacted conditions roughly half, especially among homes for sale in Toronto and in Vancouver’s Lower Mainland. From a national perspective the market is balanced, with a sales-to-new-listings ratio of 54.4 per cent, down slightly from the 56.2 per cent measured in August.
The sales-to-new-listings ratio, which determines what percentage of all newly listed homes sold over the course of the month, indicates whether a real estate market is in buyers’, balanced, or sellers’ territory. A ratio between 40 – 60 per cent indicates market balance, with below and above that threshold indicating buyers’ and sellers’ markets, respectively.
“Sales activity may get all the press, but it’s the balance between that and the number of homes for sale that sets the tone for pricing environment,” stated Gregory Klump, CREA’s chief economist.
“In markets with an abundant supply of homes and slower sale activity, buyers have the upper hand when it comes to negotiations over price. However, in places where buyers are keen to make a purchase but there’s a shortage of homes for sales, sellers are in the drivers’ seat when it comes to price.”
Klump adds that it will “be interesting” to see how these supply and demand factors are impacted when interest rates rise further this year; now that the U.S.-Canada trade situation has been clarified, it’s highly anticipated that the Bank of Canada will hike its trend-setting rate this month, with another increase expected before 2018 is through.
By Home Type
As has been the long-term trend, apartments posted the largest year-over-year price gains in September, up 8.4 per cent. That’s followed by townhouses at 4.5 per cent, while both one- and two-storey detached home prices remained flat, at -0.3 per cent respectively.
Home Price by Region
British Columbia: Vancouver real estate prices are still rising throughout the Lower Mainland, but at a slower pace, increasing just 2.2 per cent. The rest of Vancouver Island, as well as the Fraser Valley and Victoria, however, continue to soar, up 1.2 per cent, 8.5 per cent, and 8.7 per cent, respectively.
Ontario: Home values experienced robust price growth throughout the Greater Golden Horseshoe, up 8 per cent in Guelph, 6.1 per cent in Hamilton-Burlington, 5.9 per cent in Niagara Region, 2 per cent in the GTA, and 1.4 per cent in Oakville-Milton. The only declines were recorded in Barrie and District, as prices fell -3.6 per cent.
Ottawa continue to enjoy booming growth, as demand for two-storey homes pushes the average home price 6.9 per cent higher.
Prairies: It’s a softer story for the largest Alberta and Saskatchewan markets, with declines recorded in Calgary (-2.6 per cent), Edmonton (-2.6 per cent), Regina (-4.7 per cent), and Saskatoon (-1.9 per cent).
Eastern Canada: The growth trend continues in La Belle Province, with the average price of a Montreal home soaring 6.1 per cent, while the Moncton market enjoys a 3.4-per-cent uptick.
Penelope Graham is the Managing Editor at Zoocasa, and has over a decade of experience covering real estate, mortgage, and personal finance topics. Her commentary on the housing market is frequently featured on both national and local media outlets including BNN Bloomberg, CBC, The Toronto Star, National Post, and The Huffington Post. When not keeping an eye on Toronto's hot housing market, she can be found brunching in one of the city's many vibrant neighbourhoods, travelling abroad, or in the dance studio.