September 16, 2016
Sales activity down month-over-month in 60 per cent of Canadian markets – an anticipated August lull for many, with the Lower Mainland a national anomaly
The number of home sales in Canada fell by 3.1 per cent compared with the month before, which was the largest monthly drop since December 2014, according to statistics released September 15 by the Canadian Real Estate Association (CREA).
This was led by a steep decline in Greater Vancouver following the introduction of a new property transfer tax on homes purchased by foreign buyers, said the association. CREA pointed out that 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 falling from their peak of spring 2016.
Much of the monthly declines in national sales in recent months reflect slowing activity in the Lower Mainland, added the report.
However, when home transactions are examined year-over-year, sales activity (not seasonally adjusted) was up 10.2 per cent across the country compared with August 2015. Sales were up from year-ago levels in about three-quarters of all Canadian markets, led by Greater Toronto. Greater Vancouver was not one of those markets, however, posting the largest year-over-year sales decline.
“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 Cliff Iverson, CREA president.
“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.”
Gregory Klump, CREA’s chief economist, pointed out, “Single family homes sales were already cooling before the new land transfer tax on foreign home buyers in Metro Vancouver came into effect. The surprise announcement of the new tax caused sales to brake hard.”
The national average price for homes sold in August 2016 was $456,722, up 5.4 per cent compared with the same month last year, which is the smallest annual increase since January 2015. CREA said that 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.”
The report said that if Greater Vancouver and Greater Toronto are excluded from calculations, the average price is reduced by nearly $100,000 to $357,033.
However, the report added, “Greater Vancouver’s share of national sales activity has diminished, causing it to have less upward influence on the national average price.”
The slowing activity in the Lower Mainland was a driver in the CREA’s updated housing forecast for 2016, which was also issued September 15.
Home sales across Canada are forecast to rise by 6.0 per cent year over year to a record 535,900 units in 2016, which is just slightly down from CREA’s previously predicted sales increase of 6.1 per cent to 536,400 units this year. Strong gains in Ontario are expected to be offset by a slight decline in anticipated whole-year activity for BC.
Despite this, among the larger provinces, British Columbia is still forecast to post the largest annual increase in activity this year (up 14.6 per cent), even though "much of that strength is in the rearview mirror at this point,” according to the CREA.