The Canadian Real Estate Association blames tighter mortgage lending rules for sliding sales and slow price growth for single-family homes this November.
National home sales fell 2.3 per cent from October to November and 12.6 per cent year over year. At the same time, both one-storey and two-storey single-family homes gained less than 1 per cent. It appears buyers have been pushed into less expensive market segments like apartments, up 6 per cent, or townhouses, up 4 per cent.
Gregory Klump, CREA’s chief economist blames the new lending rules of 2018 which force borrowers to qualify at their contract rate plus 2 per cent or at the Bank of Canada’s five-year mortgage rate rate, whichever higher. The Bank of Canada rate is currently 5.34 per cent, although actual mortgage contract rates can be found for as low as 3 per cent.
“The decline in homeownership affordability caused by this year’s new mortgage stress-test remains very much in evidence,” he says. “Despite supportive economic and demographic fundamentals, national home sales have begun trending lower. While national home sales were anticipated to recover in the wake of a large drop in activity earlier this year due to the introduction of the stress-test, the rebound appears to have run its course.”
Still, CREA’s aggregate benchmark price for 17 key markets was up 2 per cent year over year in November, to $618,800. This metric is a more accurate picture than the average of the “typical”.
Vancouver Island posted the best gains, with its benchmark price rising double-digits year-over-year by 12.65 to $486,700. Guelph, a city in southwestern Ontario posted the second-to-best gains, rising 9.26 to $530,000. CREA’s benchmark index does not track other popular southwestern Ontario cities like Kitchener real estate or homes for sale in London, Ontario, but their own real estate boards showed they had equally strong months, with both cities saying they had the second-best November’s on record. The third-best gains on CREA’s index was Niagara Region, rising 7.19 per cent to $393,500.
On the opposite side of things, Regina posted the worst gains on the index, dropping 3.99 per cent to $272,100. Like some other prairie cities, prices are down even from five years ago, which CREA blames on a glut of inventory. Calgary posted the second-to-worst gains on the index, dropping 2.88 per cent to $418,300. Meanwhile, Barrie, the only Ontario city on the index to post negative gains, declined 2.08 per cent to $466,400.
For more details on Canadian cities, check out the infographic below:
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