Canadian home sales plunged the most in a decade last month, driven by fewer transactions in a Toronto market squeezed by tougher mortgage lending rules and higher interest rates.
Sales fell 14.5% nationwide from December and were down 26.6% in Toronto, the Canadian Real Estate Association said Thursday from Ottawa. The national decline was the biggest since 2008 and Toronto’s was the biggest since 1989, according to historical CREA data.
The housing market is cooling off from heady price gains of 30 percent in Toronto after policy makers stepped in with measures including a foreign buyer tax. The January decline comes after a record December, when buyers rushed into the market before a new federal mortgage lending stress test came into force. The Bank of Canada raised its trend-setting interest rate last month for the third time since July.
“The piling on of yet more mortgage rule changes that took effect starting New Year’s Day has created home buyer uncertainty and confusion,” CREA President Andrew Peck said in a statement. Some of January’s decline reflected buyers accelerating their purchase plans in December, the group said.
The weakness didn’t show up in prices, with the nationwide benchmark index up 0.3% on the month. Prices were little changed in Toronto. The unadjusted average sales price across Canada of $481,562 was up 2.3% from a year earlier.
Sales fell in about three-quarters of housing markets across the country. The number of new homes listed for sale dropped by 21.6% from December to January to the lowest since 2009, CREA said.
The realtor group has predicted sales will weaken by about 5% this year.
On top of the new mortgage stress test, the Bank of Canada may raise interest rates twice more this year, futures trading suggests. Those moves are the first time some younger buyers have experienced any major rise in debt servicing costs, and Governor Stephen Poloz has said household finances remain a key vulnerability.
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