Marked decline in activity came amid tougher mortgage rules, rising interest rates
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Canadian home sales plunged the most in a decade last month, driven by fewer transactions in a Toronto market squeezed by tougher mortgage lending rules and higher interest rates.
Sales fell 14.5% nationwide from December and were down 26.6% in Toronto, the Canadian Real Estate Association said late last week.
The national decline was the biggest since 2008 and Toronto’s was the biggest since 1989, according to historical CREA data.
The housing market is cooling off from heady price gains of 30% in Toronto after policy makers stepped in with measures including a foreign buyers’ tax. The January decline came after a record December, when buyers rushed into the market before a new federal mortgage lending stress test came into force. The Bank of Canada raised its trend-setting interest rate last month for the third time since July.
Read more: National residential sales decline sharply in January
“The piling on of yet more mortgage rule changes that took effect starting New Year’s Day has created home buyer uncertainty and confusion,” CREA President Andrew Peck said in a statement, as quoted by Bloomberg.
Some of January’s decline reflected buyers accelerating their purchase plans in December, CREA added.
The weakness didn’t show up in prices, with the nationwide benchmark index up 0.3% on the month. Prices were little changed in Toronto. The unadjusted average sales price across Canada of $481,562 was up 2.3% from a year earlier.
Sales fell in about three-quarters of housing markets across the country. The number of new homes listed for sale dropped by 21.6% from December to January to the lowest since 2009, CREA said.
The realtor group has predicted sales will weaken by about 5% this year.
