The usually busy spring and summer Canadian housing market is less so this season, according to the May data from the Canadian Real Estate Association.
Sales have not picked up from the first quarter of 2017 as expected, and are down 16.2 percent year-over-year, reaching a seven-year low.
“The stress test that came into effect this year for homebuyers with more than a 20 per cent down payment is continuing to suppress sales activity,” says Barb Sukkau, CREA president. “The extent to which it is sidelining homebuyers varies among housing markets and price ranges.”
National home prices have also declined from May 2017—6.4 percent to an average of $496,000.
There’s a caveat, however. Excluding the most expensive markets in the nation, the Greater Toronto and Vancouver areas, would cut over $104,000 from the national average price to just over $391,100, meaning the year-over-year decline is a slight two percent.
The least expensive property types continue to be the bright stars in CREA’s reports—condos and townhouses lead the market in price growth at 12.7 and 4.9 percent, respectively. In comparison, more expensive property types, like single-family homes, are down up to 4.7 percent.
Similarly, property in the smaller and less expensive urban centres of Ottawa and Montreal are gaining, as properties in the uber-expensive mega-cities of Toronto and Vancouver are waning.
It’s hardly a surprise when a property in Vancouver, at over $1.1 million dollars, is more than double the national average.
This could either be a choice buyers are making, or essentially a choice made for them by the new stress test, which limits borrowing:
“This year’s new stress-test became even more restrictive in May, since the interest rate used to qualify mortgage applications rose early in the month,” says Gregory Klump, CREA’s chief economist. “Movements in the stress test interest rate are beyond the control of policy-makers. Further increases in the rate could weigh on home sales activity at a time when Canadian economic growth is facing headwinds from U.S. trade policy frictions.”
Nevertheless, CREA looks forward with optimism. They say sales will rebound to 474,800 by 2019 and prices will rise 3.8 per cent to $518,300.
Check out the infographic below for city-to-city price comparisons:
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