Canada’s housing market lost steam for the fourth straight month in August, as a plunge in Vancouver home sales left Toronto as the country’s lone hot major real estate market.
National home sales fell an annualized 3.1 per cent last month compared with July. It was the largest one-month decline since December, 2014, the Canadian Real Estate Association said.
Home sales fell 7 per cent below their peak in April, although they remained 10 per cent above the same period last year. The national average home price rose 5.4 per cent from last August, to $456,722, a slowdown from the annualized 17-per-cent price gains at the start of the year.
Reeling from the B.C. government’s Aug 2. introduction of a 15-per-cent land-transfer tax on foreign buyers, Greater Vancouver home resales plunged nearly 19 per cent in August from July. It was the sixth straight month of sales declines in the Lower Mainland. Sales activity in the Vancouver region has fallen 35 per cent since December and was 25 per cent below August, 2015, levels. Sales also fell in the neighbouring Fraser Valley, which includes several communities subject to the tax.
“The statistics for August has provided further evidence that Canada’s housing market has entered a cooling phase, with one of its two principal engines – Vancouver – now clearly in correction mode,” wrote Royal Bank of Canada senior economist Robert Hogue.
The average price of homes sold in the region fell 18 per cent from a month earlier, to $845,244. Vancouver’s benchmark price, which tracks the price of a “typical” home in the area, rose slightly in August from a month earlier and was more than 31 per cent above year-ago levels, to $933,100. The discrepancy reflects the fact that the new tax has mainly appeared to affect sales of more expensive detached homes.
By contrast, both sales and prices continued to skyrocket in Greater Toronto. Home resales surged more than 23 per cent in the Toronto region from year-ago levels. Average prices jumped nearly 18 per cent from the same period last year to $736,354. Toronto’s overheated market also spread to other neighbouring communities, such as Niagara Region and Hamilton.
Elsewhere, home sales were down 6 per cent from year-ago levels in Calgary, while benchmark prices fell more than 4 per cent from August, 2015. Sales also fell from year-ago levels in Edmonton and Regina, while they rose modestly in most other markets.
B.C.’s introduction of a tax on foreign buyers has put an end to the “two-speed” housing market – Toronto and Vancouver versus everywhere else – that has dominated the country’s housing market for much of the year.
The sharp drop in average prices in Vancouver last month has already exceeded Toronto-Dominion Bank’s gloomy predictions for a 10-per-cent correction in the region’s housing market. “The sudden introduction of the new property transfer tax on homes purchased by foreign buyers in Metro Vancouver has created a cloud of uncertainty among home buyers and sellers,” wrote CREA president Cliff Iverson.
Vancouver’s market has moved from a tight seller’s market at the start of the year into balanced conditions in August, CREA said. The slowdown in the market could trigger “a deluge of new listings” as homeowners put their properties up for sale in hopes of locking in their existing gains, wrote Dominion Lending Centre chief economist Sherry Cooper.
Meanwhile, Toronto’s housing market is the tightest it has been in 30 years, wrote Bank of Montreal senior economist Robert Kavcic. He likened the soaring sales and price growth to conditions the country last saw in the real estate boom of the late 1980s.
Some of that growth appears to be driven by foreign buyers shifting their focus away from Vancouver, wrote Toronto-Dominion Bank economist Diana Petramala. In light of the fact that Ontario has given few signs it plans to implement a foreign buyer tax of its own, Ms. Petramala predicted Toronto was unlikely to follow Vancouver and begin to cool this year.
CREA predicted that Toronto and Vancouver’s housing markets will continue to diverge into next year, helping to cool overall home price growth. Nationally, CREA predicted average prices would drop 0.2 per cent to $486,600 in 2017, led by a 2.2-per-cent price decline in B.C.
That forecast mirrors a growing sentiment among Canadian investors. In a semi-annual online survey by Manulife Financial Corp., the number of Canadians who said they were interested in investing in housing fell four points between December and May. The percentage who felt it was a bad time to buy a house was highest in B.C., at 35 per cent.
“Canadians say that owning a house is a top priority for them, yet they’re not willing to invest in housing right now,” wrote Manulife senior investment strategist Kevin Headland. “There are concerns that this housing bubble might just burst, leaving them with a bad investment.”Report Typo/Error