Residential property sales in Canada fell 5.8% between July and August, the largest monthly decline since June 201, according to the latest data from the Canadian Real Estate Association (CREA).
Declines were reported in about two thirds of all local markets representing 80% of national activity, with monthly sales declines in almost all large urban centres, including Greater Toronto, Greater Montreal, Greater Vancouver, the Fraser Valley, Calgary, Edmonton, and Ottawa.
Actual, not seasonally adjusted, activity was down 8.9% in August 2012 compared to the same month last year, the biggest year on year drop since April 2011.
The actual, not seasonally adjusted, national average price for homes sold in August 2012 was $350,192, up three tenths of 1% from the same month last year.
Year on year price growth held steady at 5.6% in August for one storey single family homes and was 5.2% for two storey single family homes.
Prices for townhouse and apartment units continue to see more modest gains, rising 1.7% and 1.8% respectively year on year, smaller gains than were seen in July.
The biggest year on year increase was in Calgary at 6.5%, followed by Greater Toronto at 6.3%, the Fraser Valley at 2.5%, and Montreal at 2.2%. Prices in Greater Vancouver fell 0.5% year on year, its first decline in almost three years.
‘While we always caution that housing market trends at the national level can and do run counter to trends in many local markets, the decline in activity in August was definitely the result of much of the country moving in the same direction,’ said CREA president Wayne Moen.
The August sales figures will provide comfort to policymakers, providing the first clear indication that the recent changes to mortgage regulations aimed at cooling the market are working as intended, according to Gregory Klump, CREA’s chief economist.
‘With previous changes to mortgage regulations, demand rose between the time changes were announced and their implementation, and invariably fell in the months immediately after being implemented, before recovering to long-term levels. By contrast, recent changes to mortgage regulations were in force more quickly after being announced, so home buyers had far less time to react. As a result, demand didn’t pick up just before the changes took effect, while sales declined once they did,’ he explained.
The number of newly listed homes fell 1.7% in August compared to July. New supply was down in just over half of all local markets in August, but the 7.7% month on month decrease in Greater Toronto by far contributed most to the national decline.
With the decline in sales activity outstripping the decrease in new listings, the national housing market was more balanced in August than it had been at any other point in the past two years, said CREA.
‘The broadly based decline in August sales activity suggests that some buyers may no longer qualify for a mortgage now that amortization periods for high ratio mortgages have been shortened,’ said Klump.
‘As the lynchpin of the housing market, lower first time buying activity will have down stream effects over the rest of the market. While we expect it will likely take more time for move-up buyers to sell their current home, a few more months of data are needed to gauge the broader impact of recent regulatory changes on Canada’s housing market,’ he added.