With housing sales numbers stronger than expected at the start of this year, many of the more optimistic housing market observers were hoping that the worst is over for Canada’s housing slump.
But is it really? New data from research firm Teranet shows house prices in Canada fell in January for the fifth straight month, with prices dipping 0.3 per cent from December.
Teranet’s composite index of 11 major housing markets across Canada was still up on a year-over-year basis, by 2.7 per cent — but that’s the slowest rate of growth since 2009, when Canada’s economy was being rocked by the global financial crisis.
Vancouver was the only city on the index to post a year-on-year price decline, dropping 2.5 per cent from January, 2012.
But hopes that Toronto’s housing market is rebounding fizzled earlier this week with a report from the Toronto Real Estate Board showing an 8.3-per-cent decline in the volume of house sales in the first half of February. And the decline was not limited to the arguably overbuilt condo sector, with sales of detached homes falling as well.
Sales volumes were particularly weak in the 905 — the suburbs ringing Toronto — where they fell at least 11 per cent. But, as the Toronto Star noted, homeowners are pulling their houses off the market, reducing volume and increasing the demand for what remains. That means prices for detached homes in greater Toronto managed to rise about 4 per cent, year over year, from last year.
Bank of Canada Governor Mark Carney is among those who believe the housing slump has farther to go. In an interview last Sunday with CTV’s Question Period, Carney said the slump will likely last another two years and will see prices fall, on average, 10 per cent.
Carney said the run-up in house prices in recent years is “not normal.”
“Real wealth is built through innovation, and it’s gained through hard work … not through some magical asset inflation,” he said, as quoted at the Globe and Mail.
The Financial Times in the U.K. suggested in an article earlier this month that Canada’s apparent housing bust “is casting a pall over the last few months” of Carney’s time as Bank of Canada governor, as he prepares to take over the Bank of England job this summer.
Many of the country’s real estate associations continue to argue that Finance Minister Jim Flaherty’s new, tighter mortgage rules, introduced last summer, are behind the housing slowdown, as opposed to any fundamental problems in the housing market.
“There is little news to report about national sales activity, which continues to hold fairly steady at the lower levels first reached when mortgage rules were tightened in mid-2012,” Canadian Real Estate Association President Wayne Moen said in a statement earlier this week.
But some analysts are saying that, at this point, that argument may not fly anymore.
TD Bank senior economist Sonya Gulati told the Globe and Mail last month that the impact of the new rules is likely fully priced into the market at this point.