Residential real estate activity, excluding new properties, is softening in Canada with the latest figures showing that recent changes to mortgage regulations are having an impact.
Seasonally adjusted national home sales activity was down 4.4% in April compared to the previous month with the largest declines in some of Canada’s more expensive and active markets, including Toronto, Vancouver, and the Fraser Valley.
The Canadian Real Estate Association (CREA) points out that the mortgage changes pulled forward some sales activity that would have otherwise occurred at a later date.
Changes to mortgage regulations and other transitory factors also boosted transactions in April last year at the expense of activity in subsequent months. This also contributed to a broadly based decline in sales activity in April 2011 compared to levels a year ago, CREA said.
Actual, not seasonally adjusted, activity was down 14.7% from levels reported last April, the CREA index also shows. The national average price for homes sold in April 2011 was $372,544, up 8% from the same month last year. April marked the third consecutive month in which the national average price was up by eight per cent from year ago levels.
But CREA pointed out that the national average price has been skewed in recent months due to surging multi million dollar property sales in selected areas of Greater Vancouver. Demand for these properties moderated in April from the previous month. A reduction in this source of upward skewing for the national average price was offset by fewer sales of lower priced properties.
‘Although down nationally, sales activity in April this year compared to April last year was up in a number of local housing markets. Housing market trends often evolve and diverge from national trends due to local factors,’ said CREA president Gary Morse.
CREA chief economist explained how the changes have affected the figures. ‘Last April, several transitory factors artificially boosted sales. This included the impending tightening of mortgage rules, speculation about higher interest rates and the looming introduction of the HST in some provinces,’ he said.
‘This year, additional measures to tighten mortgage rules were implemented in March and the other transitory factors were absent. This makes it difficult to compare the two months in order to reliably gauge the impact of the latest round of mortgage rule changes,’ he added.
The index also shows that the number of newly listed homes edged up 1.3% in April from the previous month on a seasonally adjusted basis, but remained well below levels in January and February, when impending changes to mortgage regulations were announced.
With fewer sales and an increase in newly listed homes, the national housing market moved further into balanced territory in April, CREA added. The national sales to new listings ratio, a measure of market balance, stood at 52.5% in April, down from 55.7 in March.
More than two thirds of local markets in Canada were balanced in April. Almost half of the remainder could be classified as sellers’ markets based on a ratio of sales to new listings above 60%, it added.
Klump also said that the changes to mortgage regulations that took effect in April 2011 also likely sidelined a number of first time buyers. By contrast, higher end home sales in Greater Vancouver and Toronto had their best April ever.