Ottawa, ON, September 15, 2016 – According to statistics released today by The Canadian Real Estate Association (CREA), national home sales declined for a fourth consecutive month in August 2016.
- National home sales fell 3.1% from July to August.
- Actual (not seasonally adjusted) activity came in 10.2% above August 2015.
- The number of newly listed homes declined 2.7% from July to August.
- The MLS® Home Price Index (HPI) rose 14.7% year-over-year in August.
- The national average sale price climbed 5.4% in August from one year ago.
The number of homes trading hands via Canadian MLS® Systems fell by 3.1 percent month-over-month in August 2016 – the largest monthly decline since December 2014. Together with declines in each of the three previous months, the slowdown in August places national home sales activity 6.9 percent below the record set in April 2016.
Sales activity was down from levels in the previous month in close to 60 per cent of all markets in August, led by a steep decline in Greater Vancouver following the introduction of a new property transfer tax on homes purchased by foreign buyers.
Activity also dropped significantly in the Fraser Valley. August marked the sixth consecutive monthly decline for home sales in the Lower Mainland, as transactions in Greater Vancouver and the Fraser Valley had already been retreating sharply from their peak reached in February. Much of the monthly declines in national sales in recent months reflect slowing activity in the Lower Mainland.
“The sudden introduction of the new property transfer tax on homes purchased by foreign buyers in Metro Vancouver has created a cloud of uncertainty among home buyers and sellers,” said CREA President Cliff Iverson. “That the tax applies to sales that had not yet closed shows how the details for a new tax policy can unnecessarily destabilize housing markets. More broadly, it speaks to the importance of evidence-based decision making to ensure that unintended consequences and collateral damage are minimized when new policies or tighter regulations affecting housing markets are being actively considered.”
“Single family homes sales were already cooling before the new land transfer tax on foreign home buyers in Metro Vancouver came into effect,” said Gregory Klump, CREA’s Chief Economist. “The surprise announcement of the new tax caused sales to brake hard.”
Actual (not seasonally adjusted) sales activity was up 10.2 percent year-over-year (y-o-y) in August 2016. Sales were up from year-ago levels in about three-quarters of all Canadian markets, led by Greater Toronto. By contrast, Greater Vancouver posted the largest year-over-year sales decline.
The number of newly listed homes fell by 2.7 percent in August 2016 compared to July. While new supply was down in just over half of all local markets, declines in the Lower Mainland, Greater Toronto and Montreal far outweighed the monthly rise in new listings in less active markets.
With sales and new listings both down by similar magnitudes in August, the national sales-to-new listings ratio was 61.6 percent, which was little changed from 61.8 percent in July. The ratio had previously been as high as 65.3 percent in May.
A sales-to-new listings ratio between 40 and 60 percent is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.
The ratio was above 60 percent in almost half of all local housing markets in August, virtually all of which continue to be located in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario. Notably, the ratio moved into the mid-50 percent range in Greater Vancouver in August after having begun the year at 90 percent.
The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.
There were 4.8 months of inventory on a national basis at the end of August 2016. This was up from 4.6 months in the previous three months and marked the first increase in almost a year.
The number of months of inventory had been trending lower since early 2015, reflecting increasingly tighter housing markets in Ontario – and, until recently, in B.C. It nonetheless remains below two months in Victoria and virtually everywhere within the Greater Golden Horseshoe region, including Greater Toronto, Hamilton-Burlington, Oakville-Milton, Guelph,
Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and Woodstock-
Ingersoll. Indeed, major areas within the GTA have less than one month of inventory.
The Aggregate Composite MLS® HPI rose by 14.7 percent y-o-y in August 2016, the biggest gain since October 2006.
For the seventh consecutive month, y-o-y price growth accelerated for all Benchmark property types tracked by the index.
Two-storey single family home prices posted a 16.3 percent year-over-year increase in August 2016, as did townhouse/row units. One-storey single family homes followed close behind with a y-o-y increase of 14.4 percent, while apartment unit prices rose 11.7 percent y-o-y.
While prices in 9 of the 11 markets tracked by the MLS® HPI posted y-o-y gains in August, increases continue to vary widely among housing markets.
Greater Vancouver (+31.4 percent) and the Fraser Valley (+38.3 percent) posted the largest y-o-y gains by a wide margin. Smaller double-digit y-o-y percentage price gains were also recorded by Greater Toronto (+17.2 percent), Victoria (+18.9 percent) and Vancouver Island (+13.1 percent).
By contrast, prices were down -4.1 percent y-o-y in Calgary in August. Although prices there have held steady since May 2016, they have remained down from year-ago levels since September 2015 and are 4.7 percent below the peak reached in January 2015.
Additionally, prices were down by -0.9 percent y-o-y in Saskatoon in August. While prices have remained below year-ago levels since August 2015, they are on track to begin rebounding before year-end should current trends persist.
Meanwhile, home prices posted additional y-o-y gains in Greater Moncton (+6.6 percent), Regina (+3.7 percent), Greater Montreal (+2.5 percent) and Ottawa (+1.7 percent).
The MLS® Home Price Index (MLS® HPI) provides the best way of gauging price trends because average price trends are prone to being distorted by changes in the mix of sales activity from one month to the next.
The actual (not seasonally adjusted) national average price for homes sold in August 2016 was $456,722, up 5.4 percent y-o-y, making it the smallest increase since January 2015.
The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets.
Greater Vancouver’s share of national sales activity has diminished, causing it to have less upward influence on the national average price. Nonetheless, if Greater Vancouver and Greater Toronto are excluded from calculations, the average price is reduced by about $100,000 to $357,033.
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PLEASE NOTE: The information contained in this news release combines both major market and national sales information from MLS® Systems from the previous month.
CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.
MLS® Systems are co-operative marketing systems used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.
The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 115,000 REALTORS® working through some 90 real estate Boards and Associations.
Further information can be found at http://www.crea.ca/statistics.
For more information, please contact:
Pierre Leduc, Media Relations
The Canadian Real Estate Association
Tel.: 613-237-7111 or 613-884-1460
Ottawa, ON, September 15, 2016 – The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations in 2016 and 2017.
Canadian housing market trends have largely evolved in line with previous expectations over the second quarter of 2016, with the exception of sales activity in British Columbia and Ontario.
Sales in the Lower Mainland of British Columbia have braked more abruptly than anticipated, reflecting buyer uncertainty following the introduction of the new property transfer tax on Metro Vancouver home purchases by foreign buyers. By comparison, transactions in Ontario have held steady in recent months near record levels and have yet to show signs of cooling.
Taking these factors into consideration, sales forecasts have been revised upward for Ontario and downward for British Columbia. These revisions largely offset each other at the national level.
In addition, Alberta’s sales forecast has been revised upward, reflecting better than expected activity during the second quarter and decent sales momentum entering the third quarter. Even so, the current economic climate suggests Alberta sales may struggle to maintain traction over the remainder of 2016 and into 2017.
Nationally, sales activity is forecast to rise by 6.0 per cent to 535,900 units in 2016, which is little changed from CREA’s previously predicted sales increase of 6.1 per cent to 536,400 units this year. This represents a new record for annual sales. However, after adjusting for population growth, sales are still expected to remain below the peak reached in 2007. (Figure A)
Among the most populous provinces, British Columbia is still forecast to post the largest annual increase in activity this year (+14.6 percent) notwithstanding that much of its strength is in the rear-view mirror at this point.
Prince Edward Island is forecast to post the largest annual percentage increase in sales this year (+20.1 percent). This would make it one of only four provinces to set a new annual sales record in 2016, along with British Columbia, Manitoba and Ontario.
Among provinces where housing market prospects are closely tied to the outlook for natural resource prices, Alberta is still expected to record the largest annual decline in activity in 2016 (-8.8 per cent), followed by Saskatchewan (6.1 per cent). Meanwhile, Newfoundland and Labrador is now forecast to register a small increase of 1.2 percent due to stronger than expected sales in the second quarter.
Although housing demand remains strong among many housing markets in Ontario, a lack of supply is projected to restrain the increase in sales activity (+7.1 percent) this year.
Elsewhere, sales are forecast to rise in Manitoba (+5.3 per cent), Quebec (+5.2 per cent), New Brunswick (+2.8 per cent) and Nova Scotia (+3.1 per cent), reflecting recent sales momentum and anticipated improvements in economic prospects in these provinces.
Year-over-year average price gains have continued to mount in Ontario and British Columbia. While having accelerated in the former, price growth showed tentative signs of moderating in the latter. As a result, the average home price forecast for Ontario has been raised further but revised lower for B.C., reflecting a bigger than anticipated decline in higher-priced single detached home sales in the Lower Mainland region.
In provinces where economic and housing market prospects are closely tied to the outlook for the oil patch and other natural resource industries, average prices appear to be stabilizing in Alberta and Saskatchewan while softening further in Newfoundland and Labrador. Average prices in other provinces are either rising modestly or remain stable, reflecting well balanced supply and demand.
The national average price is now forecast to rise by 10.1 per cent to $487,800 in 2016, with a slightly smaller gain in British Columbia ($695,000; +9.2 per cent) and a slightly larger gain in Ontario ($524,600; +12.7 per cent). Elsewhere, average prices are forecast to rise by 1.6 percent in Manitoba, and by 2.1 percent in both Quebec and New Brunswick. Annual average prices in Alberta, Saskatchewan and Nova Scotia are projected to remain largely stable.
By comparison, the average price forecast for Prince Edward Island (+9.3 percent) has been raised to reflect exceptionally strong price gains in the second quarter. Newfoundland and Labrador’s average price is now forecast to ease by 6.4 percent.
In 2017, national sales are forecast to number 532,900 units, representing a decline of -0.6 per cent from projected activity this year. Transactions in B.C. and Ontario are anticipated to remain strong but fall short of this year’s record levels due to deteriorating affordability and a lack of supply for single family homes. British Columbia home sales are forecast to decline by 4.0 percent, while annual sales in Ontario are forecast to retreat by 1.0 percent.
Sales are also forecast to ease slightly in 2017 in New Brunswick (-0.6 percent), Nova Scotia (-2.2 per cent) and Prince Edward Island. In the case of New Brunswick and Prince Edward Island, those declines are more a story about unexpected strength in 2016. The sales forecast for Prince Edward Island in 2017 is still historically very strong, as the province’s economy is expected to continue to benefit from a lower Canadian dollar.
Meanwhile, consumer confidence should start to strengthen and slowly draw homebuyers off the sidelines in Alberta, Saskatchewan and Newfoundland and Labrador as oil prices and economic prospects gradually improve. The forecast rise in Alberta’s sales in 2017 also reflects slow sales activity in the first quarter of 2016, a repeat of which is not expected.
Sales activity is forecast to continue rising in Manitoba (+2.8 percent) and Quebec (+1.8 percent), reflecting further anticipated improvements for these provinces economic prospects.
The national average price is forecast to ease by 0.2 per cent to $486,600 next year, with modest price gains near or below inflation in most provinces save for British Columbia, which is forecast to see a small decline of about two percent.
That flat profile for the national average price in 2017 along with a decline in British Columbia is reminiscent of 2012, when a more normal year for activity in Greater Vancouver followed record level sales activity at the highest end of its housing market the year before. As such, the forecast decline reflects the influence of sales activity on average price, as it did in 2012 versus 2011.
Meanwhile, an ample supply of listings relative to demand will continue to keep price gains in check in other provinces, although inventories have begun to shrink in provinces where supply had been elevated in recent years.
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About The Canadian Real Estate Association
The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 111,000 real estate Brokers/agents and salespeople working through more than 100 real estate Boards and Associations.
For more information, please contact:
Pierre Leduc, Media Relations
The Canadian Real Estate Association
Tel.: 613-237-7111 or 613-884-1460
The Bank of Canada announced on September 7th, 2016 that it was keeping its trend-setting target overnight lending rate at 0.5 per cent.
The Bank acknowledged that inflation risks were “tilted more to the downside since July” when it published its most recent economic forecast. Normally, this would signal that it may lower interest rates in the near future.
However, the Bank also said it remains concerned about rising mortgage debt, throwing cold water on the idea that it might lower rates for fear of fueling further household debt.
The big picture for the Bank’s key policy interest rate remains unchanged: it will stay low for longer – likely remaining where it is when the first day of school rolls around next year and maybe beyond.
As of September 7th, 2016, the advertised five-year lending rate stood at 4.74 per cent, unchanged from the previous Bank rate announcement on July 13th and up 0.1 per cent from one year ago.
The next interest rate announcement will be on October 19th, 2016 and will be accompanied by its Monetary Policy Report which will update the Bank economic forecast.