Canada’s existing home sales rise sequentially in December, home prices to flatten out in 2017

Canada’s existing home market performed well in 2016 on the whole, with sales reaching record levels and prices rising nearly 11 percent in the year, which was mostly driven by Vancouver and Toronto. However, conditions began to weaken towards the end of 2016 with Toronto being the last market booming during the end of 2016, noted TD Economics.

Existing sales rose 2.2 percent sequentially in December. However, this rise just made up for less than half of the huge drop registered in November, with sales still declining 5 percent year-on-year.  The average home prices grew just 3.5 percent year-on-year in December and dropped 1.9 percent sequentially. But this partially showed a shift in sales with the uptick in the expensive Vancouver market surpassed by a sharp rise in activity in Saskatoon, Edmonton and Calgary.

Adjusting for housing type and location, prices still grew strongly by 14.2 percent year-on-year, with prices for all housing types rising at a double-digit pace. Still, all markets where prices were growing at double-digit pace were in Ontario and B.C.

Sales in Vancouver steadied in December; however, it was still down 40 percent year-on-year. On the contrary, sales continued to pull away in Toronto from other Canadian markets in December. Existing home sales rose just 1 percent in the month. In Toronto, the average home price and MLS quality adjusted home price index rose close to 20 percent year-on-year in December.

In spite of higher interest rates and tighter mortgage regulations, the real estate report underlines that the party might not be over yet, stated TD Economics. Firstly, even if the mortgage regulations have already come in, they do not apply to the ones who had a pre-approved mortgage before the 1 October implementation data. The impact as such might not be totally realised until January.

Furthermore, the effect of higher mortgage rates is twofold, according to TD Economics. However, higher interest rates might not begin to bite until the second half of 2017.

Home prices in Canada are likely to flatten out in 2017 and in 2018; however, regional divergence underlying that the trend continues to be wide, added TD Economics. Prices are anticipated to stay depressed in Vancouver in 2017 but rise in the high single digits in Toronto and a more moderate 3 percent to 5 percent elsewhere.

At 04:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was slightly bearish at -61.8035, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -63.0192. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex