In its Wednesday (February 15) report, the Canadian Real Estate Association (CREA) announced that the average home sale price nationwide stood at $470,253 in January, representing a miniscule 0.2 per cent year-over-year growth.
In the same month, sales volume declined by 1.3 per cent, the second lowest monthly level since fall 2015.
CREA officials stated that the tighter stress test implemented last year might have played a significant role in these developments, as the regulatory revisions are applying considerable pressure to speculators.
“Canadian homebuyers face some challenges this year, including new mortgage rules that make it harder to qualify for a mortgage and regulatory changes that will push up mortgage financing costs,” CREA president Cliff Iverson said, as quoted by CBC News.
“It will take some time to gauge the extent to which these challenges will weigh on home buyers in different housing markets across Canada.”
In the wake of the data release, Dominion Lending Centres chief economist Sherry Cooper cautioned that 2017 will prove to be a challenging year for the Canadian residential real estate segment and for the economy as a whole.
“Housing activity will not provide the boost to overall economic growth in 2017 that it did in 2015 and the first half of 2016 as first-time homebuyers will find it more difficult to qualify for a mortgage and credit availability is diminished by the disproportionate impact of the new regulations on nonbank lenders,” Cooper wrote.
Fully half of the nation’s housing markets—including the Greater Toronto Area, Greater Vancouver, and Montreal—have suffered declines in sales activity, Cooper added.
TD Bank economist Diana Petramala agreed, adding that Vancouver is a critical component in the apparent slowdown considering the massive decline in sales numbers (almost 40 per cent in 2016).
“The biggest factor expected to cool housing demand in 2017 will be higher mortgage rates,” Petramala stated in a note. “Combined with deteriorating affordability as home prices rise at more than four times income growth, the higher borrowing costs will start to bite into demand.”
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