TORONTO — Home sales are not going to be as big of a boost to the Canadian economy this year as they were in 2016, the Canadian Real Estate Association (CREA) said Jan. 16 as it released its latest batch of figures.
The real estate association says home sales were up 2.2 per cent in December from the previous month, rebounding partially from a big drop following the introduction of new mortgage rules.
The number of homes trading hands posted the biggest monthly retreat in more than four years from October to November, CREA said.
"New regulations mean that in order to qualify for a mortgage, home buyers will either have to save longer for a bigger down payment or purchase a lower priced home," CREA’s chief economist Gregory Klump said in a statement. "In urban centres where the latter are in short supply, that’s likely to translate into fewer sales."
Ottawa moved to tighten mortgage rules in October, including requiring that all insured mortgages undergo a stress test to determine whether borrowers are still able to make mortgage payments if interest rates rise or their income declines.
Such tests were previously not required for fixed-rate mortgages longer than five years.
TD economist Diana Petramala says it will take some time before the full impact of the changes materialize.
"Even though the mortgage regulations have already kicked in, they do not apply to those who had a pre-approved mortgage prior to the Oct. 1 implementation date," Petramala said. "As such, the effect may not be fully felt until January."
Residential construction contributed seven per cent of Canada’s GDP last year, according to BMO economist Robert Kavcic.
While final figures for the full year are not yet available, Kavcic says the real estate industry as a whole contributed roughly 12 per cent of GDP.
That figure is likely to be lower in the year ahead, he predicts.
"One of the big contributors has been Vancouver, and just through the last four or five months the market there has already started to correct," said Kavcic.
On a year-over-year basis, CREA says home sales were down five per cent last month compared to December 2015, when they reached the highest level ever for that month.
Annually, the number of homes that changed hands was up 6.3 per cent last year compared with 2015, as sales started out strong before softening in the latter part of the year.
The real estate association says the MLS home price index in December was up 14.3 per cent compared with a year ago, while the national average sale price climbed 3.5 per cent year-over-year.
Supply continued to tighten, with new listings down in more than half of all local markets.
CREA said the number of homes newly listed for sale slipped three per cent from November to December, with B.C.’s Lower Mainland, Calgary and the Greater Toronto Area seeing the biggest declines.