Photo: Chris Tyler/Flickr
Last month national home sales saw the largest monthly drop in seven years, led by a significant slump in transactions in the Greater Toronto Area (GTA).
The number of existing homes sold across the nation in June fell 6.7 per cent from May and actual (not seasonally adjusted) activity was down 11.4 per cent year-over-year, according to the Canadian Real Estate Association’s (CREA) latest data release.
In June, sales were down in 70 per cent of local markets from the previous month, including all markets in Ontario’s Greater Golden Horseshoe, British Columbia’s Lower Mainland, Kingston, Montreal and Quebec City.
With the GTA taking the largest hit in sales last month, Gregory Klump, CREA’s Chief Economist, attributes the decline to the Ontario Fair Housing Plan. The new policy was announced in April 2017 and included a 15 per cent tax on non-resident buyers in an effort to cool the scorching markets in the Greater Golden Horseshoe.
“Changes to Ontario housing policy made in late April have clearly prompted many homebuyers in the Greater Golden Horseshoe region to take a step back and assess how the housing market absorbs the changes,” says Klump in a statement.
On a year-over-year basis, half of all local markets saw a decline in sales last month. Conversely, Calgary, Edmonton, London and St. Thomas, Ottawa, Montreal and Halifax-Dartmouth topped the list with home sales surpassing year-ago levels.
Along with a drop in sales in June, the GTA also saw a significant decline in the number of newly listed homes compared to record levels in April and May.
According to CREA, activity in the GTA reflected a buyers’ market in June as the sales-to-new listings ratio fell below 40 per cent.
The association says a ratio between 40 and 60 per cent is consistent with balanced housing market conditions. If levels are below or above this range then it would suggest a buyers’ and sellers’ market, respectively.
After being in the high 60 per cent range three months ago, the national sales-to-new listings ratio moved towards balanced market territory last month at 52.8 per cent.
Before the new policy was implemented in the Greater Golden Horseshoe, the region’s market was extremely tight with months of inventory at just 0.8 months in February and March, an all-time low. However, the region’s months of inventory is on the rise, sitting at 2.5 months in June.
With sales down and months of supply slowly growing in the Greater Golden Horseshoe, BMO economists Douglas Porter and Robert Kavcic argue that Ontario’s new policy did indeed cool the market.
“In a nutshell, the measures worked—sales in the GGH [Greater Golden Horseshoe] were down 33% y/y, while the rest of Ontario (not affected) was little changed,” write Porter and Kavcic in a note published today.
Last month, while the actual benchmark price of a home in the Greater Toronto Area surged 25.3 per cent year-over-year to $810,700, this still represents a slowdown in price growth compared to record levels seen a year ago.
Meanwhile, in BC’s Lower Mainland, benchmark prices are experiencing a modest recovery after falling in the second half of 2016, largely due to the introduction of the foreign-buyer tax for Metro Vancouver last August. Last month, Greater Vancouver saw a 7.9 per cent year-over-year price increase to $998,700 and CREA suggests this upward trend will continue this summer.
Included in CREA’s data was also the recovering city of Calgary which saw a slight price gain in June to $435,900, up 0.6 per cent compared to the same period last year.
The national average price of a home was $616,500 last month, a 15.8 per cent per cent increase compared to a year ago.
However, Porter and Kavcic say the national average price is skewed as its weight is dominated by Toronto’s slowing but elevated activity.
“Note that among the 26 largest cities, the median price increase is 5.1% y/y, which may be the best representation of underlying prices at this unusual stage of the cycle,” say Porter and Kavcic.