Resale market climbs 4.1%
OTTAWA – The resale market ended 2017 with a bang as sales through the Multiple Listing Service (MLS) operated by the Canadian Real Estate Association (CREA) posted its fifth consecutive monthly increase, fully recovering from the slump that struck last summer.
The realtors’ group said sales were up in about 60% of all local markets, led by that in the Greater Toronto Area (CTA), Edmonton, Calgary, the Fraser Valley, Vancouver Island, Hamilton-Burlington and Winnipeg.
Actual sales were up 4.1% from December 2016 and while activity remained below year-ago levels in the GTA, the decline there was offset by some sizeable y-o-y gains in the Lower Mainland of British Columbia, Vancouver Island, Calgary, Edmonton, Ottawa and Montreal.
“Monthly momentum for national home sales activity gained strength late last year and further expected economic and job growth will buoy sales activity this year despite slightly higher expected interest rates,” CREA president Andrew Peck said in a statement.
“National home sales in December were likely boosted by seasonal adjustment factors and a potential pull-forward of demand before new mortgage regulations came into effect this year,” CREA chief economist Gregory Klump added. “It will be interesting to see if monthly sales activity continues to rise despite tighter mortgage regulations that took effect on January 1st.”
The number of newly listed homes rose 3.3% in December. As in November, the national increase was overwhelmingly due to rising new supply in the GTA.
New listings and sales have both trended higher since August. As a result, the sales-to-new listings ratio has remained in the mid-to-high 50% range since then, which CREA says is indicative of a “balanced national housing market.”
Admitting balance can vary by local market; the association reported that more than two-thirds of all local markets were in balanced market territory in December 2017.
CREA’s other important measure – the number of months of inventory, which represents how long it would take to liquidate current inventories at the current rate of sales activity – was 4.5 months in December.
The actual national average price for homes sold in December 2017 was just over $496,500 – up 5.7% from one year earlier. Excluding Greater Vancouver and the GTA – the two most active and expensive local markets in Canada – from the calculation trims the national average price to just under $381,000.
In his research note, Michael Dolega, director and senior economist at TD Economics, said CREA’s report provides “an encouraging look” at the resale market before the implementation of new and tougher mortgage qualification regulations that have been introduced by the federal government.
Indeed, the new rules are expected to have a significant impact on sales in the GTA and throughout British Columbia, two areas of the country where affordability remains a real issue.
Dolega suggests the Ontario market “could take a breather” thanks to the new rules but this won’t be known until the sales figures for January are published next month.
“Strong economic conditions have underpinned solid housing demand in Quebec, with tighter resale markets and accelerating prices the result,” he added. “Gains have been concentrated in Montreal’s market, owing to labour market outperformance. Looking ahead to 2018, solid job growth should support higher sales and rising prices in Quebec, given the healthy affordability metrics.”
He also noted population growth has sparked improved activity in Atlantic Canada, with sales climbing in all Maritime Provinces in December. “For 2017 overall, relatively firm gains were observed in Nova Scotia, New Brunswick and P.E.I.,” Dolega said. “On the flip side, falling employment has kept a lid on sales in Newfoundland & Labrador, and we look for more of the same this year.”
Sales also improved in energy-rich Alberta and Saskatchewan. “Markets are generally balanced in the former,” he noted, “though appear somewhat oversupplied in the latter. As such, we anticipate modest price gains in Alberta in 2018, while prices will likely drop for the fourth straight year in Saskatchewan.”
Dolega said TD Economics expects the Bank of Canada to hike interest rates on Wednesday (17 January) – the third increase since last July. “Higher rates in tandem with tighter mortgage lending rules … should ensure that the soft landing gripping Canada’s housing market has further room to run,” he said.