TORONTO – The Canadian housing market appears to have achieved “a soft landing” so far with sales cooler but still fairly steady along with prices, Scotiabank says.
Nationally, sales in October were down about 10 per cent from the spring, but only marginally below the average pace of the past decade, said the report Tuesday by Scotiabank economist Adrienne Warren.
Warren noted the moderation mirrors a modest softening in the job market over the summer and follows repeated warnings to Canadians to be careful about the amount of money they borrow.
The easing also follows a tightening of mortgage lending rules by the federal government in the summer.
“The latest round of regulatory changes that took effect in early July, including the lowering of the maximum amortization period from 30 to 25 years, has contributed to the softening but does not appear to have sharply accelerated the decline,” Warren wrote in the report.
“Meanwhile, anecdotal reports point to a lower level of investor and/or foreign demand.”
A report by the Canadian Real Estate Association last month suggested that the resale of homes across Canada in October was down slightly from September and a year ago, while prices held steady.
However, some of the country’s hottest markets — Vancouver, Toronto and Montreal — saw sales down from a year ago.
Warren said housing demand is expected to remain on the softer side for now.
“This could put some further downward pressure on sales volumes as well as prices, especially in markets that have already shifted into buyers’ territory or in certain market segments that are potentially oversupplied,” she said.
“However, with the Canadian economy continuing to post healthy job growth and sellers proving responsive to the underlying shift in market conditions, a sharp decline in prices nationally is unlikely.”
The Scotiabank report noted that globally there is still more weakness than strength in housing markets around the world, though the downward pressure on prices in a number of countries has eased.
“In the majority of advanced and emerging-nation property markets we track, average inflation-adjusted house prices were negative on a year-over-year basis in the third quarter,” Warren wrote.
“However, many are showing some tentative signs of stabilization, including the U.S., the U.K., Australia and China, supported in part by highly accommodative monetary policy.”
Warren suggest the relatively flat global performance suggests households are being cautious, even with low interest rates and lower prices making homes more affordable.
Housing markets remain weakest in Europe.