Canadian real estate market really feels the chill

Real Estate Broker/Owner with Zolo Realty

The State of the Canadian Real Estate Market in May 2018

After analyzing the latest national residential real estate stats by the Canadian Real Estate Association (CREA), we see that home sales didn’t change significantly month-to-month between April to May 2018, but it was a different story for year-over-year sales activity. While the national average sale price has mostly remained stable —if we exclude the Greater Vancouver Area (GVA) and the Greater Toronto Area (GTA) — inventory for all property types continues to increase across the country.

Sales are Down due to Mortgage Stress Test

According to CREA’s newly released nationwide stats, home sales went down by 0.1% from April to May 2018. While this change is relatively small, it still marks the lowest level of national sales activity in over 5 years.

We knew that the mortgage stress test, that came into effect early this year, was going to have a significant effect on the number of homes sold. Sure enough, there was a marked nationwide 16.2% reduction in sales from May 2017 to May 2018. This reduction also marks a seven-year low for May.

A little over half of all local housing markets have reported fewer sales in May compared to April, led by the Okanagan region, Chilliwack and the Fraser Valley. There was, however, a slight increase in activity in Calgary, Thunder Bay, Brantford, London and St. Thomas, Oakville, Milton and the Quinte Region west of Kingston.

The average national price of homes as of May 2018 is around $496,000, which is a 6.4% decrease from May 2017. If we exclude the most expensive markets, which are again the GVA and the GTA, the average home price goes down to $391,000, and the year-over-year decrease goes down to 2%.

It surprises no one that affordability for the average consumer continues to be low in the GVA. Due to its low number of new constructions, and high demand, prices have continued to increase. However, for real estate investors, rental properties continue to be a great investment in this area, due to a high demand and appreciation of apartments, townhouses and row units. Apartments gained a 12.7% in value year-over-year in May, while townhouses and row units gained 4.9%.

Within the Greater Golden Horseshoe area, price gains have visibly slowed compared to May 2017. The GTA had a 5.4% decrease, Oakville-Milton had a 5.9% decrease, and Barrie and District had a 6.3% decrease. The only exception is Guelph, which had a 3.8% increase in prices.

Calgary and Edmonton average home prices are slightly down from May 2017. Calgary had a decrease of 0.5% and Edmonton a decrease of 0.9%. Regina and Saskatoon had a more visible decrease of 6.2% and 2.7% respectively.

Ottawa had an average price increase of 8.2% (including a 9.5% increase in two-storey single-family homes), Greater Montreal had a 6.7% increase, and the Greater Moncton Area had a 4.3% increase.

What can home buyers and sellers expect this year?

Because we see an increase in new listings while the number of sales has remained basically the same as in April 2018, the sales-to-new listings ration is at 50.6%. According to experts, when we have a sales-to-new listings ratio between 40% and 60% the overall real estate market is balanced, with neither buyers nor sellers dominating. For that reason, we must look at individual markets to see whether they favour buyers or sellers.

Even though we’re witnessing an increase in housing inventory across the board and a slowdown in sales, we see a growing number of homeowners hesitant to sell, because they find it hard to find a suitable place to move into.

According to the CREA President Barb Sukkau, the stress test continues to suppress sales activity and will continue to do so for the foreseeable future. However, the extent to which it discourages home buyers varies from housing market to housing market. Also quoting Gregory Klump, CREA’s Chief Economist, “this year’s new stress-test became even more restrictive in May, since the interest rated used to qualify mortgage applications rose early in the month”.

As always, your best bet is to speak with a trusted Realtor in your area, to help you price your property to sell or to find the best deals and make the strongest offers if you’re buying.


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