On January 1st new mortgage rules went into effect in Canada. These new underwriting rules and higher interest rates are already starting to affect the market in two key ways. First, in December Canada saw the highest number of monthly sales on record as buyers attempted to squeeze in transactions before the new rules took effect. Second, January saw a sharp drop in MLS listing sales and an overall decline of 14.5% from December 2017 to January 2018.
While these effects aren’t unexpected, the repercussions will be felt throughout 2018 as economists predict declining sales and flat prices through the end of the year.
- National MLS sales in Canada dropped by 14.5% from December 2017 to January 2018.
- The new housing supply for Canada has dropped in 85% of all markets.
- Senior economist Robert Kavcic notes that the 26.6% dip in sales in January offsets the October-December sales ramp-up. He also cautions against reading too much into the January numbers.
The January Sales Slump
Canadian home sales dropped sharply in January to their lowest monthly level in three years amid a retreat in listings as new mortgage rules came into place, according to a new report from a national real estate group.
The Canadian Real Estate Association (CREA) said Thursday that home sales through the Multiple Listing Service (MLS) declined by 14.5 per cent from December to January this year.
Economists Claim There’s No Cause for Alarm
In a commentary, BMO Capital Markets senior economist Robert Kavcic said Toronto home sales fell 26.6 per cent in January, but added that the slide “almost precisely” offsets the ramp-up in sales over the final three months of last year.
Vancouver sales were off by 10.5 per cent in January.
Kavcic said Vancouver, much like Toronto, has a “deep rift in conditions” between its detached-home market, which has falling prices, and its condo market, which he described as “extremely tight” with prices up more than 27 per cent year-over-year.
Predictions for 2018
“Still, we remain of the view that weakness will manifest as a continuation of the soft landing that has been taking place in Canada’s housing market recently,” they wrote. “Ultimately, we expect declining sales and flat prices this year before activity improves somewhat in 2019.”
View the original article at: CBC