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Since last month’s release of CREA housing data, the Ontario government has introduced a similar 15% tax on foreign purchases in the Greater Golden Horseshoe (GGH), which is Canada’s largest urbanized area centred on the City of Toronto, where house prices have risen very sharply over the past decade and spiked in 2016 (see map below). This has caused great concern at all levels of government. The Bank of Canada has repeatedly warned that the housing boom is unsustainable and household debt levels relative to income at record highs is a threat to financial stability.
Not seasonally adjusted sales were down 7.5% year-over-year, with widespread declines led by the Lower Mainland of British Columbia, where activity continues to run well below last year’s record levels. Sales in Calgary and Edmonton are up from last year’s lows and are trending higher in Ottawa and Montreal.
According to Gregory Klump, CREA’s Chief Economist, “Homebuyers and sellers both reacted to the recent Ontario government policy announcement aimed at cooling housing markets in and around Toronto. The number of new listings in April spiked to record levels in the GTA, Oakville-Milton, Hamilton-Burlington and Kitchener-Waterloo, where there had been a severe supply shortage. And with only ten days to go between the announcement and the end of the month, sales in each of these markets were down from the previous month. It suggests these housing markets have started to cool. Policy makers will no doubt continue to keep a close eye on the combined effect of federal and provincial measures aimed at cooling housing markets…, while avoiding further regulatory changes that risk producing collateral damage in communities where the housing market is well balanced or already favours buyers.”
New Listings Shot Up in April
The number of newly listed homes jumped 10% in April, led by a 36% surge in the GTA. Housing markets in the GGH also saw similar percentage increases. Supply shortages have been a major issue depressing sales activity and raising prices, especially in and around Toronto and parts of B.C.
The jump in new listings and the decline in sales eased the national sales-to-new listings ratio to 60.1% in April compared to 67.3% in March. The ratio in the range of 40%-to-60% is considered generally consistent with balanced housing market conditions. Above 60% is considered a sellers’ market and below 40%, a buyers’ market.
The sales-to-new-listings ratio was above the sellers’ market threshold in about half of all local housing markets, the majority of which continued to be in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario.
Number of Months of Inventory
The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.
There were 4.2 months of inventory on a national basis at the end of April–up slightly from 4.1 months in March when it fell to its lowest level in almost a decade.
Although new listings surged in the Greater Golden Horseshoe, inventories remain very tight across the region. Ontario’s recent changes to housing policy were announced late in the month, so their full effect on the balance between supply and demand is yet to be seen.
Prices Continue to Rise
The Aggregate Composite MLS House Price Index (HPI) rose 19.8% year-over-year last month. Once again, price gains accelerated for all benchmark housing categories tracked by the index.
This price index, unlike those provided by local real estate boards and other data sources, provides the best gauge of price trends because it corrects for changes in the mix of sales activity (between types and sizes of housing) from one month to the next.
Prices for two-storey single family homes posted the strongest ever year-over-year gains (+21.8%), followed by townhouse/row units (+17.2%), apartment units (18.8%) and one-storey single family homes (17.2%). In many of these regions, the supply of new single-family homes is so limited, you practically need to knock one down to build a new one.
After having dipped in the second half of last year, home prices in the Lower Mainland of British Columbia have been recovering and are up from levels one year ago. They are now achieving new heights or trending toward them (Greater Vancouver: +11.4% y-o-y; Fraser Valley: +18% y-o-y).
Meanwhile, benchmark home price gains remained in the 20% range in Victoria and elsewhere on Vancouver Island. Price gains were in the 30% range in Greater Toronto and Oakville-Milton, and ranged in the mid-20% in Guelph.
By comparison, home prices eased in Calgary (-0.9% y-o-y) and Saskatoon (-2.6% y-o-y) and are now about 5.5% below their peaks reached in 2015.
Home prices were up modestly from year-ago levels in Regina (+0.4% overall, led by a 2% increase in apartment prices), Ottawa (+4% overall, led by a 4.9% increase in two-storey single family home prices), Greater Montreal (+3.7% overall, led by a 5.5% increase in prices for townhouse/row units) and Greater Moncton (+4.8% overall, led by a 12.7% increase in prices for townhouse/row units). (Table 1).
The actual (not seasonally adjusted) national average price for homes sold in April 2017 was $559,317, up 10.4% from where it stood one year earlier.
The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which are two of Canada’s most active and expensive housing markets. Excluding these two markets from calculations trims more than $150,000 from the average price.