OTTAWA – Canada’s residential real estate market continued to cool in February, a trend that the industry’s main association says is fallout from tougher borrowing and lending rules brought in last summer.
The Canadian Real Estate Association also cut its forecast Friday for sales this year after a weak second half of 2012 that saw sales slow more than it expected in some markets.
The association said 2013 sales are expected to total 441,500 units, down 2.9 per cent from 454,573 in 2012. The revised outlook compared with earlier expectations for a two per cent drop in sales.
The national average home price is forecast to slip by 0.2 per cent to $362,600.
“Mortgage rules are expected to remain as they are, so sales should be less volatile than they have been in recent years,” said Gregory Klump, the association’s chief economist.
“Interest rates are also expected to remain low as the economy grows and adds jobs, which is supportive for the resale housing market.”
TD Bank economist Diana Petramala said it appears the Canadian housing market has gone through a “soft landing.”
“The good news is that sales are now at levels that we feel are well supported by underlying employment and population growth.
“In turn, existing home sales are likely to stabilize in the coming months. Prices are expected to continue to weaken as demand for Canadian housing remains modest.”
For February, CREA said sales were down 15.8 per cent compared with a year ago — a decline that was exaggerated slightly by an extra day in February 2012.
Sales were down 2.1 per cent month-to-month in February — reversing a small gain in January.
Klump noted the decline from early 2012 reflects reduced demand due to tighter mortgage rules brought in by the federal government last July.
“Until we get well into the summer months, year-over-year comparisons to months in the first half of 2012 are predictably going to be down significantly but not necessarily be indicative of further deterioration,” Klump said.
Of the 26 local markets tracked by CREA, all but one showed year-to-year declines in actual sales — with Edmonton being the exception.
The association also said its house price index had its smallest year-to-year gain since March 2011, rising 2.7 per cent to 156.5 last month.
The national average price for homes sold in February through its members was $368,895.
That was a one per cent decline from the same month last year — although CREA said there would have been a small increase without Vancouver’s numbers.
Home sales in Vancouver fell 29.2 per cent compared with a year ago, and 9.8 per cent compared with January.
The average price in Vancouver in February was $760,976, down 5.6 per cent from a year ago.
BMO Capital Markets senior Robert Kavcic noted Vancouver was the “bad apple” in the results.
“Location is key, and Vancouver (or B.C. generally) is the weak neighbourhood with buyers firmly in control,” Kavcic wrote in a report.
“This masks more balanced conditions elsewhere, with prices in some other markets stabilizing, if not improving somewhat after adjusting to stricter mortgage rules implemented in July.”
In 2014, CREA forecasts sales will gain 4.5 per cent to 461,200 due to a slow but steady improvement, while the national average price is expected to gain 1.7 per cent to $368,700.