OTTAWA (Reuters) - Resales of Canadian homes dropped 14.5 percent in January from December to the lowest monthly level in three years as tighter mortgage rules doused demand, the Canadian Real Estate Association said on Thursday.
The industry group said actual sales, not seasonally adjusted, fell 2.4 percent from January 2017, while home prices climbed 7.7 percent from a year earlier, according to the group’s home price index.
“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 the report.
New and tougher rules on mortgage lending were imposed Jan. 1 amid fears of a housing bubble, requiring lenders to “stress test” borrowers to ensure they could withstand higher interest rates. The changes mean fewer buyers qualify for loans.
“The decline in January sales provides clear evidence that the strength in activity late last year reflected a pull-forward of transactions, as rational home buyers hurried to purchase before mortgage rules changed in 2018,” said Gregory Klump, CREA’s chief economist.
The number of newly listed homes plunged 21.6 percent in January to the lowest level since the spring of 2009, the report showed. New supply was down in about 85 percent of all local markets, led by a drop in the Greater Toronto Area, CREA said.
With new listings falling more than sales, the national sales-to-new listings ratio tightened to 63.6 percent in January, the report showed.
The housing market in Toronto, Canada’s largest city, and nearby cities cooled dramatically last summer after the province imposed new measures to curb speculation, including a foreign buyers tax, but regained some strength by the end of the year.
Analysts were divided over whether the nation’s extended housing boom would crash or achieve a soft landing as the cumulative effect of mortgage rule changes and rising interest rates weigh on demand.
The national average price for homes sold in January rose 2.3 percent from a year earlier to just over C$481,500 ($385,015), continuing a deceleration in home price appreciation as the softening in Toronto took some steam out of price gains.
($1 = 1.2506 Canadian dollars)
Reporting by Andrea Hopkins; Editing by Bernadette Baum