OTTAWA (Reuters) - Canadian home resales fell in April as a government move to cool the long housing boom sent buyers to the sidelines and sparked a spike of new listings, the Canadian Real Estate Association said on Monday.
Sales dropped 1.7 percent in April from March’s record level while listings rose 10 percent, the industry group said. Prices, which take longer to adjust, were up 19.8 percent from a year ago, according to the group’s home price index.
The sharp slowdown was led by Toronto, Canada’s largest city and the capital of the province of Ontario, where months of double-digit appreciation had sparked fears of a bubble.
The Ontario government in April imposed a 15 percent tax on foreign buyers, among other measures, in a bid to cool the market, as happened in Vancouver last August when a foreign buyers tax was imposed there.
Toronto sales fell 6.7 percent and listings surged 36 percent, CREA said. Listings in Ontario more broadly surged 21.6 percent, the biggest monthly increase since 1989 - the last time the Canadian housing market saw a dramatic slowdown.
“It suggests these housing markets have started to cool,” CREA Chief Economist Gregory Klump said in a statement, referring to a spike in new listings in and around Toronto and far-flung suburbs that had benefited from a spillover effect.
While BMO Capital Markets senior economist Robert Kavcic said the peak price growth in the Toronto region was likely over, a recent rebound in Vancouver - which had similarly cooled in response to the foreign buyers tax - suggest Toronto’s slowdown may not last.
“The question is how much the market will cool from the unsustainable 30 percent-plus pace, and how long the adjustment will persist. If Vancouver is any guide, the answers appear to be somewhat and not too long, at least while interest rates are pegged at current levels,” Kavcic said in a research note.
Canadian interest rates are near historic lows, and the Bank of Canada is not expected to raise borrowing costs until 2018, though mortgage rates will likely creep higher as the Federal Reserve raises rates in the United States.
Sales rose in Vancouver in April but remained down from record levels before the tax was imposed in August.
The actual national average price was up 10.4 percent at C$559,317 ($410,749) compared with a year earlier, the report showed.
Reporting by Andrea Hopkins in Ottawa and Fergal Smith in Toronto; Editing by Bernadette Baum and Dan Grebler