OTTAWA – The number of homes sold in September climbed for the second month in a row after a slowdown earlier this year that was led by a cooling in the Toronto market.
Canadian Real Estate Association said Friday sales through its Multiple Listing Service in September were up 2.1 per cent compared with the previous month. The increase followed a 1.3 per cent increase in August.
TD Bank senior economist Michael Dolega said unlike the gain in August, that was driven by Toronto, the increase for September was more widespread.
But he noted rising interest rates and coming regulatory changes, including a potential new stress test for borrowers with uninsured mortgages, could impinge on the housing market.
“Having said that, after some near-term weakness, likely to last into mid-2018, activity should begin to rebound thereafter given the fundamentally supported demand related to strong job growth and strengthening wage dynamics,” Dolega wrote in a note to clients.
Home sales in Canada had been slowing this year following changes by the Ontario government aimed at cooling the Toronto market. CREA noted that sales in September were down almost 12 per cent from the record set in March before Ontario announced its housing plan.
Also weighing on the real estate market has been rising mortgage rates.
The Bank of Canada has raised its key interest rate target twice this year, driving the big bank prime rates and the cost of variable-rate mortgages higher. The cost of new fixed-rate mortgages have also risen as yields on the bond market have also risen.
Meanwhile, the Office of the Superintendent of Financial Institutions is finalizing new lending guidelines. Among the changes being considered is a requirement that homebuyers who do not require mortgage insurance still have to show they can make their payments if interest rates rise.
CREA noted that while the September sales results were encouraging, it is too early to tell if it is start of a longer-term trend.
“Further tightening of federal regulations aimed at cooling housing markets in Toronto and Vancouver risks creating collateral damage in markets elsewhere in Canada,” CREA chief economist Gregory Klump said.
The increase in sales in September was led by gains in Greater Vancouver and Vancouver Island, the Greater Toronto Area, London and St. Thomas, Ont., and Barrie, Ont.
Compared with a year ago, sales in September were down 11 per cent as the number of homes sold were down in close to three-quarters of all local markets.
The national average price for homes sold in September was just over $487,000, up 2.8 per cent from a year ago. Excluding Greater Vancouver and Greater Toronto, the average price was just over $374,500.