There was plenty of turmoil in housing and residential real estate through the third quarter. Things started with the province of British Columbia moving to cool the market in Metro Vancouver. Talk of action to discourage foreign speculation surfaced in June and was implemented in August.
The imposition of a 15% tax on foreign buyers does appear to have slowed things down in the region. September figures from the real estate board in Vancouver show a 33% drop in the number of sales compared to a year ago, with a 9.5% decline from August. Sales in Metro Vancouver have been slowing for about 7 months.
There have been modest, monthly price declines in Metro Vancouver during Q3 (0.1% from Aug. to Sept.) but the MLS benchmark price for all residential properties is still 29% higher than it was at this time last year.
There are concerns the foreign buyer’s tax in B.C. will lead to a jump in foreign purchases and undue price acceleration in other markets, namely Toronto. However, the Toronto Real Estate Board has not commented on this in any of its monthly market reports.
Both sales and price growth remain strong in the Greater Toronto Area. Sales climbed 21.5% y/y in September with the MLS price index up 18% for all home types.
The situations in Toronto and Vancouver have the Canadian Real Estate Association adjusting its quarterly forecast. The sharper than expected decline in B.C. has CREA lowering its forecast for the province, although it still expects to see sales growth of nearly 15%. The association does point out, though, that most of that growth has already been achieved. In Ontario sales growth is forecast at about 7.0%, restrained by a lack of supply.
The country’s other closely watched market, Alberta, is deemed to be doing better than expected. CREA’s forecast cites good second quarter sales and good momentum into Q3, and projects the province will see an 8.8% sales decline. In other resource-sensitive provinces, Saskatchewan is expected to see a 6.0% increase with Newfoundland and Labrador posting a modest 1.2% gain.
Prince Edward Island is forecast to see the best sales growth in the country with an increase topping 20%, putting it in league with B.C., Ontario and Manitoba as a growth leader.
Sales in Quebec continue to benefit from improving economic prospects and are forecast to show a 5.0% increase. The Montreal Real Estate Board reports Q3 sales were up 6.0%, its ninth consecutive quarterly increase.
The fourth quarter has also gotten off to a tumultuous start. The changes to mortgage rules and the tightening of the capital gains tax exemption, announced in early October, seemed to catch much of the industry by surprise. The full effects of the changes are not likely to be felt until the 2017 real estate season gets underway in the spring.
There was more turmoil last week when the Canada Mortgage and Housing Corporation released its Housing Market Assessment. The agency will be issued a “red warning” signalling a strong risk of future problems in Canada’s residential housing market.