OTTAWA (Reuters) - Resales of Canadian homes bounced back in August after four straight monthly declines, the Canadian Real Estate Association said on Friday, but it lowered its forecasts for sales and prices in 2017 and 2018.
Sales of existing homes edged up 1.3 percent in August from July nationwide and rose 14.3 percent in Toronto, Canada’s largest market. The industry group said, though, that only time would tell if August’s bounce is the start of a rebound after tax and rule changes announced in April doused demand.
Sales were down 9.9 percent from August 2016, while home prices were up 11.2 percent from a year earlier, according to CREA’s home price index.
Dramatically cooler demand in recent months has sparked fears that Canada could fall victim to a housing crash, and the association slashed forecasts for sales and prices for both 2017 and 2018 due to a swoon in Toronto earlier this year.
“Activity has begun to show tentative signs of stabilizing among markets in the region, but is down sharply since March amid a rapid shift in housing market balance and increased cautiousness among homebuyers,” the group said.
Sales activity is now forecast to drop 5.3 percent in 2017, a downward revision from a 1.5 percent decline forecast three months ago, and to fall another 2.3 percent in 2018, the association said.
The national average price is forecast to rise by 3.4 percent to C$506,700 ($416,352) in 2017 before falling 0.6 percent in 2018 as the impact of the Toronto correction is felt. In June, the group had expected increases of 7.4 percent in 2017 and 1.8 percent in 2018.
Besides a foreign buyers tax imposed in Vancouver in 2016 and Toronto in 2017, rising interest rates are expected dampen housing demand in the months ahead.
“Tightened mortgage rules, higher mortgage default insurance premiums, changes to Ontario housing policies and higher interest rates are factors that will continue to lean against housing market activity over the rest of the year and into 2018,” the association said.
Reporting by Andrea Hopkins; Editing by Chizu Nomiyama and Lisa Von Ahn