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CREA raises forecast for 2016 home sales, expects fewer sales in 2017
Published Thursday, December 15, 2016 10:00AM EST Last Updated Thursday, December 15, 2016 2:17PM EST
A house 'sold' sign is shown in Oakville, Ont., Monday, July 23, 2012. (Richard Buchan / THE CANADIAN PRESS)
TORONTO -- The Canadian Real Estate Association is predicting home sales will dip by about 3.3 per cent next year as deteriorating affordability, a shortage of supply and new mortgage rules slow the red-hot Toronto and Vancouver markets.
The association is predicting sales of 518,900 units in 2017, with transactions in B.C. and Ontario expected to stay strong but fall short of 2016's expected record levels.
Cailey Heaps Estrin, a Toronto-based sales representative with Royal LePage, said Thursday stricter mortgage rules introduced by Ottawa -- including increased stress tests for insured mortgages -- will cause the Toronto market to cool next year.
"There's been so much change that it's created some uncertainty in the market, with the new mortgage rules," she said.
CREA is anticipating that sales will decline in B.C. by 12.2 per cent and in Ontario by 2.7 per cent. Meanwhile, sales in Alberta are expected to rise by 3.5 per cent and in Quebec by 1.2 per cent.
Ottawa made changes in October that required all insured mortgages to undergo a stress test to determine whether borrowers are still able to make mortgage payments if interest rates rise or their income declines.
Previously, such stress tests weren't required for fixed-rate mortgages longer than five years.
TD Bank economist Diana Petramala said on top of tighter mortgage regulations, mortgage rates have shot up since October.
"As new mortgage regulation and higher interest rates cool activity next year we expect price growth to decelerate to a sub-one per cent pace nationally, but prices in the hot markets in Ontario should continue to grow at a high-single digit pace," Petramala wrote in a note to clients.
The slowdown in 2017 will follow what is expected to be record year in 2016.
CREA said Thursday that national home sales this year will be slightly higher than its previous estimates, with increased expectations for Ontario offsetting a decline for British Columbia.
The association said the number of sales this year is expected to rise 6.2 per cent to 536,700 units compared with an earlier forecast for a 6.0 per cent increase.
CREA released its updated outlook as it reported home sales through its Multiple Listing Service fell 5.3 per cent between October and November, the largest month-to-month decline since August 2012.
Compared with a year ago, sales volume in November was up 1.6 per cent.
The national average price for a home sold in November was up 7.3 per cent from a year ago at $489,591. Excluding Greater Vancouver and Greater Toronto, the average price was $361,260.