Home sales rose in Toronto and Vancouver last month as buyers returned to the market in Canada’s two most expensive cities, signalling that many Canadians are adapting to the country’s tougher mortgage stress-test rules.
Toronto continued to show stronger signs of growth, with sales climbing by 13 per cent in the Greater Toronto Area in August compared with the same month last year, according to the Toronto Real Estate Board (TREB). New listings fell and prices posted a gain of 3.6 per cent, averaging $792,611 for all types of homes last month.
By comparison, sales picked up in the Vancouver region as prices declined to their lowest level in 27 months and total listings increased.
Sales of detached homes, condos and townhouses totalled 2,231 in August, up 15.7 per cent compared with the same month in 2018, but 9.2 per cent beneath the 10-year average for August, the Real Estate Board of Greater Vancouver said on Wednesday.
The residential benchmark price decreased last month to $993,300, down 8.3 per cent from a year earlier.
The benchmark figure, an industry representation of the typical home sold in Greater Vancouver, has declined month over month for the 15th consecutive time. It has fallen from a record high of $1.1-million in May, 2018, and slumped to the lowest level since $992,500 in May, 2017, the board said in an e-mail.
“Prices are still softening, but at a much slower pace than they had been previously,” board president Ashley Smith said in an interview. “Affordability is still an issue, and we’ll be seeing more sales in the lower-price categories."
Toronto has more clearly turned the corner after two years of weak sales for low-rise housing. While sales of all types of homes climbed in August, TREB said they were led by a 21.3-per-cent increase in sales of detached houses. Prices for detached houses climbed 0.3 per cent to an average of $978,920.
Sales of semi-detached houses rose almost 12 per cent in August compared with last year, while townhouse sales rose 13.7 per cent in the GTA. Condominium sales, meanwhile, climbed a more modest 4 per cent from a stronger base last year.
“This reflects the fact that demand for more expensive home types was very low in 2018 and has rebounded to a certain degree in 2019, albeit not back to the record levels experienced in 2016 and the first quarter of 2017,” TREB president Michael Collins said in a statement.
Jason Mercer, TREB’s chief market analyst, said the increase in prices in the GTA has also been driven by a drop in new listings, which fell 3 per cent in August, tightening supply for buyers. At the end of August, active listings were down 11.2 per cent compared with the same date last year.
“Right now, the overall pace of price growth is moderate,” Mr. Mercer said. “However, if demand for ownership housing continues to increase relative to the supply of listings, the annual rate of price growth will accelerate further.”
In the Vancouver region, active listings climbed 13.3 per cent last month over August, 2018.
July sales rose 23.5 per cent from the same month in 2018, marking the first time monthly sales increased year over year since January, 2018.
“We’re getting back to more of a normalized market,” Ms. Smith said. “We’ve seen an uptick in the number of sales. What that will equate to in terms of price is to be determined. It’s really going to be dependent on the behaviour of buyers and sellers."
Canada’s banking regulator implemented a stress test on Jan. 1, 2018, to make it more difficult for buyers to qualify for mortgages. Home sales dipped in many markets after it was introduced, but began to stabilize this year as buyers adapted to the new rules and saved more for down payments.
Tsur Somerville, a professor at the University of British Columbia’s Sauder School of Business, said this summer’s sales recovery is in contrast with multiyear lows in transactions in 2018 and brisk sales from 2013 to 2017.
“It’s certainly indicative of coming off of a bottom,” he said in an interview on Wednesday. “It’s a return to a calmer level of activity and not the hyperactivity that we saw for a number of years.”
Prof. Somerville said price drops for condos haven’t been as steep as for detached homes. The benchmark price for condos sold in Greater Vancouver fell to $654,000 last month, or a 7.4-per-cent decrease from a year earlier. August’s benchmark price for detached properties sold was $1,406,700, down 9.8 per cent compared with the same month in 2018.
“A recovery in sales will firm up the bottom on prices, but it’s too early to say whether that means a slower price decline, flattening or any kind of increase,” Prof. Somerville said. “But what we know historically is that when you see this kind of sales recovery, that’s an indication that the worst part of price declines is behind you.”
The Fraser Valley Real Estate Board’s territory, which includes the sprawling Vancouver suburb of Surrey, had 1,297 sales last month, up 12.3 per cent from August, 2018. The average price for detached houses sold in the Fraser Valley slipped to $1,006,465 last month, down 0.2 per cent from a year earlier.
Industry observers say factors influencing B.C.'s housing market include taxes aimed at higher-end properties and a crackdown on money laundering, as well as what the province calls a “speculation and vacancy tax” that targets primarily non-B.C. residents who own homes that they don’t rent out.
The B.C. government’s foreign-buyers tax took effect in August, 2016, responding to concerns about the role of international influences during the housing boom from mid-2013 to mid-2016.