TORONTO (Reuters) - Sales of existing homes in Canada fell 6.8 percent in July, almost entirely because of fewer sales in the big provinces of British Columbia and Ontario, the Canadian Real Estate Association (CREA) said on Monday.
The figures are the latest to show that Canada’s recently hot housing sector is no longer playing a major role in the country’s economic recovery. Signs of a slowdown in the housing market have also cropped up in home-construction data and new-home prices.
“It looks like anyone who wanted to buy a house this year in Canada got their shopping done early,” said Doug Porter, deputy chief economist at BMO Capital Markets.
CREA said a total of 31,536 homes changed hands in July, for the smallest month-on-month decline in two months. Compared with a year earlier, sales were down 30 percent.
CREA said the national average price in July was C$330,351 ($317,645), edging up 1 percent from the same month last year. The number of new listings fell 7.2 percent from the previous month.
The slowdown in existing-home sales has been much forecast due to stricter lending rules, rising interest rates, and the introduction of harmonized sales taxes in Ontario and British Columbia.
“A slowdown in demand in these two provinces had been widely expected in July, as many purchases were brought forward into the first half of the year in advance of the introduction of the (harmonized sales tax),” CREA said.
The harmonized sales tax (HST) was introduced in July. Sales in British Columbia were down 14.1 percent, and in Ontario, they were off 8 percent. The two provinces accounted for 85 percent of the change in national activity.
Scotia Capital economists Derek Holt and Gorica Djeric said there were other factors outside of the HST that were weighing on the housing sector as every province recorded a decline in the volume of sales except Quebec.
“Rather, we’re going through a medley of influences that are taking away the momentum from Canadian housing in more than just a transitory response to the HST,” they said in a written commentary.
“Tighter mortgage rules, higher variable mortgage rates, and a return of supply in the resale and new home segments all provide a fuller picture of why Canadian house prices are correcting.”
Last month, CREA revised its forecast for Canadian home sales to say they will decline 1.2 percent this year, not increase as it previously forecast, but average prices should climb more than expected.
Porter said the next several months will probably bring “soggy” headline numbers for sales, “although with long-term mortgage rates dropping, employment improved and prices stabilized, the longer-term outlook is far from dire.”
Separately, RBC Royal Bank cut some of its residential mortgage rates by 0.10 percent on Monday. A posted five-year closed mortgage was at 5.49 percent, effective Tuesday.
Reporting by Ka Yan Ng; Editing by Peter Galloway