Home sales rose across Canada last month – except in Vancouver and Toronto – signalling that the country’s housing market remains resilient, the Canadian Real Estate Association said Friday.
Nationally, house sales rose 2.6 per cent in June from a month earlier, while the average resale price decreased slightly, by 0.9 per cent.
“Stricter mortgage rules and declining affordability appear to be taking at least some momentum out of prices, a trend that could continue if the Bank of Canada resumes its tightening campaign in the fall,” BMO Nesbitt Burns Inc. economist Robert Kavcic said in a research note.
The national average sale price in June was $372,700, an increase of 8.7 per cent from a year earlier. While the figure continues to reflect sales in expensive Vancouver neighbourhoods, activity in those areas has been waning from levels reported in February and March, the association (CREA) said.
Sales in Vancouver dipped 1.7 per cent in June from May figures. “Property sales above $1-million in Vancouver West, West Vancouver, and Richmond now account for a smaller but still elevated share of national activity,” the report noted.
Many markets saw major sales gains in June, including Calgary, Montreal, Ottawa, London, Hamilton, and Victoria. Toronto’s market remained stable.
Earlier this week, Toronto-Dominion Bank economists described Vancouver as “the poster child for those individuals worried about a real estate bubble here in Canada.” They forecast that the market, which many worry is overheating, will cool with sales and prices on average decreasing by 15.2 per cent and 10.2 per cent, respectively, over the next two years.
Over all, “the Canadian housing sector remains on a solid footing,” CREA’s chief economist Gregory Klump said.
“The rise in monthly home sales activity at the end of the second quarter, upbeat business sentiment and hiring intentions, and signs that the Bank of Canada is in no rush to raise interest rates, bode well for home sales activity and prices going into the second half of 2011,” he said.
Resale listings rose by 1.8 per cent in June from May, with the gains in Toronto, Vancouver and Ottawa contributing the most to the national increase. That announcement should be welcome news to would-be home buyers in Toronto, where demand has been outstripping supply.
On an unadjusted basis, sales were up 10.8 per cent in June compared with the same month in 2010. But the adjusted national sales activity was down 4.7 per cent in the second quarter compared with the first three months of the year.
“This in part reflects how new mortgage rules announced in January and implemented at the end of March pulled sales forward into the first quarter at the expense of sales activity in April and May. Mortgage interest rates also rose in April and May, which may have moved some home buyers to the sidelines,” the CREA report said.
In general, analysts are predicting a cooling demand for home sales for next year.
“Given expectations of moderate economic growth and only a gradual rise in interest rates, combined with limited high-risk mortgages, we maintain that the most likely outcome for Canada’s housing market over the next few years is not an abrupt downward correction but rather a period of relatively flat sales and pricing that eventually restores a better affordability balance,” said Adrienne Warren, senior economist at Scotia Capital Inc..Report Typo/Error
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