Courtesy Kim Mackrael – Wall Street Journal
OTTAWA—Canadian homes sales fell in February as housing markets were affected by higher interest rates and tighter mortgage-financing rules.
The Canadian Real Estate Association, which released the home sale data on Thursday, also lowered its forecast for national sales and average prices this year.
The Ottawa-based association, which represents the country’s real-estate agents, said sales activity across Canada in February dropped 6.5% from the previous month on a seasonally adjusted basis, marking a second straight monthly decline.
On a year-over-year basis, sales fell 16.9% in February on an actual, or not seasonally adjusted, basis. Sales activity declined in 80% of all local markets in February compared with the same month last year, the association said.
The drop in sales activity “confirms that many home buyers moved purchase decisions forward late last year before tighter mortgage rules took effect in January,” Gregory Klump, CREA’s chief economist, said in a statement.
The latest round of tightening at the federal level requires all prospective buyers—including those with a down payment of more than 20%—to undergo a so-called stress test before a bank can issue a loan. Under the stress test, buyers would have to qualify for a mortgage at whichever rate is higher: either 2 percentage points above the negotiated rate, or the Bank of Canada’s five-year benchmark rate.
Mr. Klump said momentum for home sales activity going into the second quarter of 2018 will also likely be weighed down by uncertainty in British Columbia. Last month, the province introduced another round of measures aimed at curbing foreign demand, including a higher tax on foreign buyers that applies to a wider geographic area.
The actual, not seasonally adjusted, national average price for homes sold in February was down 5% from one year earlier, CREA said. It said the average price is heavily skewed by sales in the Vancouver and Toronto areas, two of the country’s most active and expensive markets.
CREA said in its quarterly forecast that it anticipates national sales activity will fall by 7.1% while the national average price is expected to decline by 2.3% in 2018 from the previous year.
“Some home buyers will likely to stay on the sidelines amid heightened housing market uncertainty and continue saving a larger down payment before purchasing,” the agency said.