Canada’s housing market continued to cool last month, with the country’s real estate association noting that home sales fell nearly 22% from last year and nearly 9% between April and may.
The Canadian Real Estate Association (CREA) reported on Wednesday that, on an annual and unadjusted basis, sales stood at 53,720 in May, down from 68,598 transactions in the same month in 2021. In seasonally adjusted data, they amounted to 42,649, against 46,644 in April.
“Recall that we have been expecting sales to return to normal and prices to stabilize for some time now,” CREA’s senior economist Shaun Cathcart said in a statement. “On the other hand, we weren’t expecting it anytime soon. »
The country’s real estate market had started the year with a bang, showing soaring prices and a torrid pace of sales that prompted the provinces and the federal government to consider a series of easing measures.
Ontario, for example, increased a tax aimed at non-resident homebuyers from 15% to 20% in March and extended the policy to the entire province, rather than just the province. Greater Toronto Area.
But rising interest and mortgage rates, to which economists attribute much of the cooling, are having even more of an impact than the policy patchwork.
“Canadians generally expected home prices to continue to rise, which attracted investors and buyers to several properties, while causing many households to stretch the rubber band for fear of missing out” , observed Robert Kavcic, senior economist of BMO Capital Markets.
“But with the Bank of Canada’s first interest rate hike, market expectations began to crumble. »
The return of the inspections
Real estate agents are now noticing that potential buyers are negotiating more than they were able to in previous months, while sellers are coming to terms with this market shift and some are even delaying listing their homes. .
When Sara Rowshanbin, a real estate agent with Chestnut Park Real Estate in the Greater Toronto Area, tells her clients they can request a home inspection, their eyes light up because most buyers were dropping that condition when the market was hyperactive. Today, about half of the deals she helps place are conditional on an inspection.
However, the way sellers react to offers thinking of the market cooling is “everywhere”.
“Some receive them with open arms and say ‘let’s work on this together’ and others ask ‘is that a typo?’ So we can say […] that the market has changed very quickly,” she observed.
As a result, ACI found that May’s sales volume resembled that of the second half of 2019, before the onset of the COVID-19 pandemic, while pointing out that the decline was more pronounced in April.
May sales were down in three-quarters of all local markets, led by areas like the Lower Mainland in British Columbia, Calgary, Edmonton, Greater Toronto and Ottawa.
Prices less affected
The association now expects 568,288 properties to change hands this year, down 14.7% from the 2021 record. It would still be the second-highest annual figure on record. For 2023, ACI foresees a further decrease of 2.8% to 552,403 transactions.
Even so, this respite should not affect prices much.
CREA forecasts the national average house price to rise 10.8% on an annual basis to $762,386 in 2022 and expects the biggest gains to come from the Maritime provinces, Ontario and of Quebec. Then the average price will rise another 3.1% to $786,282 in 2023.
The seasonally adjusted average price in May was $700,438, down nearly 4% from April’s $728,171.
The unadjusted average price was $711,316, up about 3% from $687,595 a year earlier.
Economist Rishi Sondhi of TD Economics interpreted the numbers as a sign that activity is “particularly shrinking” in the Greater Toronto Area, where investors have played a big role over the past year.
“It’s also likely that some GTA buyers bought their homes before selling the old ones (thinking the market would stay hot) and are now forced to accept lower prices to complete their transactions,” Ms. Sondhi in a note to investors.
“However, we would expect this momentum to end in a relatively short period of time. »
New listings for sale climbed 4.5% on a seasonally adjusted basis, from 70,971 in April to 74,145 in May, influenced by a jump in new listings in Montreal.
On an unadjusted basis, new listings totaled 100,643 last month, up more than 6% from 94,704 in May 2021.