A home for sale on Claremont St. in Toronto on May 11, 2017.Fred Lum/The Globe and Mail
Canadians are adjusting to tougher mortgage qualification rules and jumping back into the real estate market, sending home sales higher in a majority of large cities in June.
The Canadian Real Estate Association (CREA) said the volume of home sales nationally climbed 4.1 per cent in June compared with May, after climbing a modest 0.6 per cent in May over April, suggesting the impact of new mortgage stress-test rules introduced on Jan. 1 is fading.
Sales were up in 15 of 26 major markets. The gains were led by the Greater Toronto Area, where the number of homes sold soared 16.6 per cent in June over May on a seasonally adjusted basis. Compared with June last year, sales were up 1.4 per cent, CREA said.
“The national increase in June home sales suggests activity may indeed be starting to turn the corner,” said Gregory Klump, CREA’s chief economist. “Even so, the number of homes trading hands has a long way to go before it returns to levels posted in recent years.”
Compared with June last year, for example, the number of homes sold nationally in June was down 11 per cent, hitting a five-year low.
Total home sales during the first half of 2018 fell 14.4 per cent nationally compared with the first six months of 2017, CREA said. Sales fell 27 per cent in the GTA, and 25.5 per cent in Greater Vancouver.
The federal government introduced new mortgage qualification rules this year to ensure home buyers could still afford their mortgages if interest rates were to rise significantly. In the first few months of the year, sales dropped sharply in many markets as buyers and sellers assessed the impact of the change. Prices remained fairly flat in many markets, supported by declining inventories of houses available to purchase.
The sales trend shifted in May and June, and the CREA data show signs of recovery from the first quarter of the year.
Tom Storey, a real estate agent in Toronto at Royal LePage Signature Realty, said he saw more clients who were active buyers in June, while others were planning to shop in July and August to take advantage of the weaker competition in the summer.
“They’re still going to be two of the lowest months of the year, because that’s just typical, but I think we’re definitely going to be up a lot from last year just based on what I’m seeing at the ground level. People are active,” he said.
CREA said more than 60 per cent of all local housing markets in Canada reported growing sales in June over May.
British Columbia was a notable exception, with the volume of home sales in the Greater Vancouver region down 1.3 per cent in June over May, and down 38 per cent in June compared with June last year.
Sales in the Fraser Valley were down 44 per cent in June over last year, while sales in Victoria fell 30 per cent compared with last June, CREA said.
B.C.’s NDP government implemented a package of real estate reforms in March, including an increase to the province’s foreign-buyers tax and a new tax on out-of-province buyers in some areas.
Toronto-Dominion Bank economist Ksenia Bushmeneva said she believes the national decline in sales this year “hit its trough” in the second quarter, and the market will gradually recover in the second half of the year.
“This was a Goldilocks report,” Ms. Bushmeneva said in a research note, adding that sales rose for the second month in a row without driving up home prices.
The latest Bank of Canada survey of senior loan officers indicated a rise in credit for mortgages because of increased competition among lenders, which should help the housing market recover, she added.
Realtor Scott Ingram of Century 21 in Toronto said sales in June “finally went sideways instead of down,” and many people are still looking for homes. But the market is still cooler than usual.
If sales in the second half of 2018 recover enough to match the number of homes sold in the second half of 2017, there would still be only about 77,400 homes sold for all of 2018 in the GTA, he said. That is far below the 92,394 homes sold in 2017, and below the Toronto Real Estate Board’s forecast of 85,000 to 95,000 in 2018.
“That’s a lot of transactions still happening. It’s not like the taps get shut right off and things drop to zero,” he said. “Still, it would be the lowest year since 2008.”