Canadian home sales tanked and price dipped in April over the previous month, marking the weakest activity since 1984 as the coronavirus pandemic slammed the housing market.
Last month, 16,612 homes were sold on a seasonally adjusted basis, down 57 per cent from 38,493 in March, according to the Canadian Real Estate Association, with Toronto, Montreal, Vancouver and other large markets continuing to deteriorate.
“The Canadian real estate market was effectively closed for business in April,” Robert Kavcic, senior economist with Bank of Montreal, said in a research note. “Where the market goes from here will depend critically on how much of the job market can be maintained, brought back, and how quickly, and how many owners, investors look to list when the market re-opens,” he said.
From March to April, new listings dropped by 56 per cent. However, unlike in March when the lack of listings combined with scant demand kept home prices steady, the average selling price across all types of residential properties fell 10.9 per cent to $475,310 in April from $533,504 in the previous month.
The country’s most expensive markets declined, with the average selling price in the Greater Toronto Area down 11.8 per cent to $789,274 from $894,745, and in the Vancouver region it was down 6.2 per cent to $1,009,570 from $1,076,461. CREA suggested that the low activity along with drop in sales of luxury homes pushed the average price down.
The home price index, an industry calculation that corrects for low volume and other distortions, showed that home prices nationally declined 0.6 per cent from March to April, the first drop since last May.
“It’s most likely because the tide of higher-end of the market has gone out more than at the more affordable end,” said CREA senior economist Shaun Cathcart.
Before the pandemic, Toronto, Ottawa, Montreal and most of Southern Ontario were showing signs of overheating, while Vancouver was recovering from stricter mortgage and buying policies. CREA had forecast sales and average selling prices to increase in the high single digits this year.
Phil Soper, Royal LePage chief executive, said there were still some properties in Toronto that were drawing multiple offers. But he also said the financial distress for some homeowners, especially real estate investors, may contribute to lower prices. “There are investors that feel overextended and are deleveraging. So there will be some bargains to be found,” he said.
Since governments halted non-essential activity in March, sales have dropped precipitously. With provinces slowly starting to reopen in May, CREA said preliminary data suggest things may have already started to pick up a bit for both sales and new listings.
The real estate slowdown will have broader economic impacts, including on municipal finances. In Toronto, for example, which has its own land transfer tax, the city had budgeted for it to bring in $800-million this year. In March, city staff projected that the tax would raise an average of about $3-million a week less than had been budgeted, for a 12-week period ending in June. They have warned that this assumed a modest shift in the real estate market and that a more pronounced change could lead to shortfalls as high as $14-million a week.
“It will definitely have a negative revenue impact on municipalities imposing a land transfer tax,” said Robert Hogue, senior economist with Royal Bank of Canada.
And the housing market has yet to feel the full impact from the economic crisis, as banks have deferred mortgage payments for more than 740,000 property owners for as long as six months.
If the economy does not recover and companies don’t start to rehire, many homeowners may not be able to pay their bills when their deferral period ends in the fall.
“You are going to start to see a lot of these people having to start making their payments again. And if they haven’t gone back to work, if their industry has been decimated by COVID or their company downsized, I think there will be an oversupply [hitting] the market in the winter months,” said Dave Butler, principal broker with Butler Mortgage Inc.
With files from Oliver Moore
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