The resale of Canadian homes fell 6.7 per cent in June from May, the largest monthly drop since 2010 and the third straight monthly decline as sales in Toronto plunged, the Canadian Real Estate Association said on Monday.
The industry group said actual sales, not seasonally adjusted, slumped 11.4 per cent from June 2016, while home prices surged 15.8 per cent from a year earlier, according to the group’s home price index.
Prices in and around Toronto, Canada’s largest city, led the monthly decline in CREA’s home price index, with Toronto prices falling 0.7 per cent in the month and prices in nearby Oakville-Milton down 3.6 per cent. Compared to a year ago, Toronto prices are up 25.3 per cent.
CREA said changes to housing rules in Ontario, Canada’s most populous province and home to Toronto, prompted homebuyers to wait and see how the market would react to yet another attempt to rein in the housing boom.
Ontario introduced a 16-point plan to douse speculation blamed for fueling an extended housing boom. The changes included a 15-per cent foreign buyers tax similar to one imposed in Vancouver in 2016.
Rising interest rates, including higher mortgage rates and a move by the Bank of Canada last week to hike its official interest rate for the first time in nearly seven years, could also play a role in the cooling market.
“The recent increase in interest rates could reinforce a lack of urgency to purchase or, alternatively, move some buyers off the sidelines before their pre-approved mortgage rate expires,” Gregory Klump, CREA’s chief economist, said in a statement.
He said buyers who had bought a home before selling their existing home may also “become more motivated to reduce their asking price rather than carry two mortgages” as the falling market gives prospective buyers cold feet.
The report showed new listings fell 1.5 per cent in June after two months of record listings in April and May, but sales dropped even further, driving the sales-to-new listings ratio to 52.8 per cent, considered balanced territory. The ratio had been in the high-60 per cent range just three months ago, when sellers in Toronto could expect multiple offers or bidding wars.
While year-over-year price gains remained in the double digits, the rate of appreciation has slowed and the actual national average price for homes sold in June was C$504,458 ($398,686), up just 0.4 per cent from a year earlier, CREA said.