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A for sale sign outside townhouses in the Fairview neighbourhood of Vancouver, Monday, March 4, 2013.Rafal Gerszak/The Globe and Mail

Ottawa's efforts to cool the housing market amid fears of rapid overheating in cities such as Toronto and Vancouver are causing steep sales declines in areas that had been relatively healthy, economists say.

The number of homes that changed hands in the Halifax-Dartmouth area during March was 36-per-cent lower than a year ago, sales in Sudbury fell 33.5 per cent, in downward pressure on savings accounts is starting to liftand in Regina 23.5 per cent.

"The government's focus was on Toronto and Vancouver, and I would call it the unintended consequences," said Canadian Imperial Bank of Commerce economist Benjamin Tal. "Cities like Winnipeg and Halifax are feeling the same pain, although they didn't need to feel the same pain, and the eventual slowdown will be more than optimal."

Finance Minister Jim Flaherty changed the country's mortgage insurance rules last July, in an effort to stem the speedy rise of consumer debt levels and house prices, citing in particular concerns about pockets such as Toronto's condo market. The changes included cutting the maximum length of an insured mortgage to 25 years from 30, and putting a halt to government-backed insurance for homes worth more than $1-million. While the latter move had a greater impact in Toronto and Vancouver, the change in amortization length had an impact on first-time buyers across the country.

"A lot of the cities that had been much better behaved in terms of pricing and overall activity have been hit as hard as Vancouver and Toronto," said Bank of Montreal economist Douglas Porter. "Some cities are really taking it on the chin."

On Monday, the Canadian Real Estate Association reported that sales of existing homes nationwide were 15.3-per-cent lower in March than a year ago. The MLS Home Price Index rose just 2.2 per cent in March, its smallest gain in over two years, said CREA, which represents the nation's realtors.

More than 90 per cent of the local markets that it obtains data from posted year-over-year sales declines, while Edmonton once again showed an increase.

Economists generally estimate that national home prices are overvalued by as much as 10 to 20 per cent, but estimates have been heavily skewed by Toronto and Vancouver (even though prices in Vancouver have come down). "One of the challenges with mortgage regulations is that they are blanket policy instruments, so they affect everybody," said Toronto-Dominion Bank economist Sonya Gulati.

Mr. Porter points to the sales decline in Winnipeg as particularly noteworthy. "Among the major cities, it's got basically the lowest prices in the country," he said. "I think by most metrics you wouldn't consider Winnipeg to be overvalued."

Winnipeg realtor Cliff King, at Re/Max Executives Realty, said sales in the city are spotty now. "Markets are so different and I think that was totally uncalled for," he said of the mortgage insurance rule changes. "It definitely had a huge impact and they should have had a program that was customized to parts of Canada that required it."

Mr. Porter said it will be a few years before it's clear whether Mr. Flaherty took precisely the right steps or not. "I believe there was broad agreement that something was needed to at least partially cool down the market," he said.

Mr. Tal noted that changing mortgage insurance rules is a relatively precise tool compared to an interest rate increase by the Bank of Canada, which would have cooled the housing market by pushing mortgage rates up but also would have affected sectors other than real estate.

"If you look at the overall situation, I think that Finance must be pleased by what they're seeing today," Mr. Tal added. "I don't think they see the slowdown as excessive, I think it is exactly what they had in mind."