OTTAWA (Reuters) - Sales of existing Canadian homes fell for the third month in a row in July, data showed on Monday, as fewer homes changed hands in Vancouver and elsewhere in British Columbia, some of the hottest markets in the country.
Still, home prices kept rising, the report from the Canadian Real Estate Association (CREA) said, lifted by a surge in prices in Vancouver and Toronto.
Seasonally-adjusted home sales declined 1.3 percent in July from June. Sales were down in just over half of all markets last month, led by the Greater Vancouver area and the Fraser Valley in British Columbia. Sales in the two regions have tumbled by 21.5 percent and 28.8 percent respectively since peaking in February, the industry group said.
The decline in sales in July even as prices rise in those areas suggests sales are muted by a lack of inventory and their increasing unaffordability, said CREA’s chief economist Gregory Klump.
Canada’s housing market has run hot in the years since the global financial crisis, supported in part by cheap borrowing costs. But the market has become fragmented with activity in regions with economies dependent on the oil business slowing as the major cities of Toronto and Vancouver accelerate.
“It’s still a two-horse race in the Canadian housing market if you lump in the areas surrounding Vancouver and Toronto,” Robert Kavcic, senior economist at BMO Capital Markets, wrote in a note.
Vancouver earlier this month imposed a tax on purchases of homes by foreign buyers to try to make the market more affordable for locals and to alleviate concerns that its market is becoming overheated.
Klump said it will take some time before the effect of the tax will be seen on sales and prices, though he noted it will not increase the supply of homes in the short term.
National actual sales, not seasonally adjusted, were down 2.9 percent from July 2015.
Home prices jumped 14.3 percent on a yearly basis, making for the biggest gain since November 2006. Greater Vancouver racked up a 32.6 percent gain, while Toronto was up 16.7 percent.
The Bank of Canada has warned of the possibility of speculation in the two cities.
The number of new listings rose 1.2 percent, helping the sales-to-new listings ratio ease to 61.6 percent after hitting a peak of 65.3 percent in May.
Reporting by Leah Schnurr; Editing by W Simon and Marguerita Choy