Canada home sales fall in August, seen cooling in 2017

Thu Sep 15, 2016 9:54am EDT
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By Andrea Hopkins

OTTAWA (Reuters) - Sales of existing Canadian homes fell in August, notching the fourth straight monthly decline, the Canadian Real Estate Association said on Thursday in a report that suggested Canada's long housing boom has begun to slow.

The industry group said sales fell 3.1 percent in August from July, the largest monthly drop in nearly two years, as a tax on foreign buyers in Vancouver sent buyers to the sidelines and doused activity in Canada's most expensive market.

Actual sales, not seasonally adjusted, were up 10.2 percent from August 2015, while CREA's Canadian home price index was up 14.7 percent in August compared with the year before, reflecting the blockbuster pace of activity prior to the slowdown.

In a separate report, CREA also revised down its forecast for sales and prices in 2016 and 2017, suggesting Canada housing boom peaked in early 2016 and has begun to cool.

CREA said the drop in sales activity in August was driven in part by a sharp decline in British Columbia as the provincial government imposed a 15 percent property transfer tax on foreign buyers of homes in Vancouver.

By contrast, sales in Ontario, the other large market, have held steady in recent months near record levels and have yet to show signs of cooling, the report showed.

“Single family homes sales were already cooling before the new land transfer tax on foreign home buyers in Metro Vancouver came into effect,” Gregory Klump, CREA’s chief economist, said in a statement. “The surprise announcement of the new tax caused sales to brake hard.”

Real estate groups and developers had largely opposed the tax on foreign buyers, but a voter backlash against wealthy investors, mostly from mainland China, had put pressure on government to do something to cool price appreciation in the already expensive market.   Continued...

Billboards surround a row of houses set to be demolished to make way for a condominium development feeding the real estate market of Toronto, Ontario, Canada July 3, 2016.  REUTERS/Chris Helgren