Festival condos . The strongest housing bubble is about to burst? Canadian home sales fell for three months in a row in June, the biggest drop in seven years.Please Visit: Festival condos to Get Your VVIP Registration Today!
Sales are down 14% from March; home sales in Toronto, Canada’s largest city, hit a seven-year low, and house prices are down 14% from March. Economists believe that the Canadian government’s policy of cooling the property market has made buyers flinch, and raising interest rates by the central bank may contribute to the cooling.
Even the “central mother” is throwing cold water on raising interest rates, and the world’s most resistant Canadian real estate bubble may really be punctured.
Housing sales across the country fell 6.7% in June from the previous month, the third consecutive month of decline and the biggest drop since June 2010, the Canadian real estate association (CREA) said on Monday. Home sales fell 11.4% in June from a year earlier, down 14% from the peak in March. Sales in Toronto, Canada’s largest city, fell 15.1 per cent month-on-month to 5977 units, the lowest level since 2010.
CREA’s MLS house price index rose 15.8 per cent in June from a year earlier, but the average national home price rose only 0.4 per cent in June from a year earlier, and the average price in June was nearly 10 per cent lower than in April. In the MLS house price index, Toronto led the decline, falling 0.7 per cent for the month and rising 25.3 per cent a year ago.
It has been mentioned on Wall Street that the Toronto housing market has been steadily rising for more than 20 years, especially in recent years. House prices in Toronto have risen by as much as 220% since their post-financial crisis lows in 2008. Average home prices in Toronto fell 14.2% in June from March, the biggest three-month decline since records began in 1988, according to CREA.
Even in Vancouver, where house prices hit record highs in May, average home prices fell 2.7% in June from a year earlier, 3.2% from a month earlier, and sales were down 12.2% from a year earlier.
Gregory Klump, chief economist of Toronto CREA, pointed out that the change in real estate policy in Ontario, Canada’s most populous province, where Toronto is located, has clearly prompted many property buyers in the greater Toronto area to “flinch” and reassess the market.
In addition, the Bank of Canada last week raised interest rates for the first time in nearly seven years. This may also play a role in cooling the property market. Klump believes that higher interest rates may make buyers less urgent, and some buyers will leave for the time being.
It is worth mentioning that after raising interest rates, the government may also have new actions to cool the property market.
The central bank’s decision to raise interest rates comes a week after (OSFI), a Canadian regulator, proposed to tighten mortgage rules this autumn, requiring lenders to guarantee that home buyers would be eligible for unsecured mortgages even if interest rates were two percentage points higher than mortgage rates.
The Globe and Mail of Canada pointed out that the proposal raises concerns that if interest rates rise further this fall, the real estate market may face greater adjustments, especially in the Greater Toronto area. This is because after the Ontario provincial government introduced the property market reform policy, in May and June this year, the property market in the region has obviously fallen in both volume and price.
The average selling price of a home in Toronto fell 6.2% month-on-month in May, while transaction volume fell 12% month-on-month. Some economists believe that talk of a government crackdown on a rapid rise in prices seems to have “changed market psychology” and that speculators may have peaked in terms of returns on property holdings.
Stubbornly resist the negative and continue to rise, there is plenty of room for the Canadian property market to fall.
The Canadian housing market is a global example of resilience this year. In early May, Canada’s largest subprime mortgage institution “burst insurance” (see for details: Trump’s trade stick waved the “victim country” real estate market shakes three times). At the end of the same month, Moody’s downgraded the six major Canadian banks on the grounds that the house price risk was too high. In addition, the overseas buyer tax introduced in Vancouver and Toronto did not affect Canadian house prices, but the increase in house prices intensified.
According to the mid-2017 financial system assessment report released by the Bank of Canada last month, house prices in the Toronto area have increased by an annualized 60%, while Vancouver has achieved an annualized growth rate of nearly 30% after a brief adjustment.
What is even more striking is that last month Canadian media revealed that OSFI had allowed Canadian financial institutions to accept Chinese assets as collateral for mortgage loans for property purchases in Vancouver. After a serious overdraft of local purchasing power, Canada unexpectedly thought of “borrowing leverage” from China.
According to the article of the Wisdom Institute on Wall Street, it is clear from the Federal Reserve, the Bank of Canada and a series of market data that Canadian house prices have reached an “intolerable” level. The Bank of Canada also acknowledged that a correction in house prices is the most likely risk in Canada.