Canada’s existing homes sales rise in September, regulations to shave around 10 pct off sales next year

Canada’s existing home sales increased in September after declining for five straight months. Existing home sales rose 0.8 percent in sequential terms and 4.2 percent year-on-year. But the sales continue to be down 5.6 percent from the record level reached in April 2016. Listings increased modestly by 0.5 percent in September, assisting in keeping the sales-to-listings ratio stable at about 62 percent. This is still indicator of a seller’s market overall, noted TD Economics.

Home prices rose robustly on a quality adjusted basis as well as on an average of sales basis. Price pressures have become broad based  throughout housing segments with town homes increased 16 percent annually, condo prices rising 11.1 percent and single-detached home prices rising 14 percent.

The strength in both sales and prices were led by the GTA market and surrounding areas. GTA sales increased to a new record high, whereas prices rose sharply by 18 percent year-on-year. Markets in Ontario continued to be the tightest throughout the nation with just one to two months of inventory.

Market activity in the Greater Vancouver Area and bigger surrounding areas continued to ease. Existing home sales dropped for the sixth consecutive month and the market has rebalanced from being in seller’s territory earlier in 2016. Composite MLS HPI grew sharply 28 percent year-on-year, but this marks a slowdown from the above 30 percent rise registered earlier in 2016. The index has dropped for two consecutive months sequentially, led by prices of detached single-family homes, said TD Economics.

Several new regulatory and tax measures that were announced recently by the federal government and set to come into effect in this month and the next month would possibly help take some steam out market activity through next year. In the eight years, this is the sixth time the government has tightened mortgage regulation.

“As such, we expect that the regulations will shave as much as 10 percent off of existing home sales and up to 1 percent off of home prices next year. The impact is expected to be more pronounced in Toronto where activity is starting to look a little frothy but should be spread across the country”, added TD Economics.