For the first time in four-and-a-half years, the average house price in Canada is lower than it was a year earlier — a clear sign that tougher housing rules and rising mortgage rates are taking a bite out of the once-hot housing market.
Declining house prices in Toronto have now spread to cities across southern Ontario, with Hamilton, Kitchener-Waterloo, the Niagara region, London and Windsor all reporting price declines in July, according to data from the Canadian Real Estate Association (CREA).
The average house price in Canada was $478,696 in July, down 0.3 per cent from the same month a year earlier. The decline reflects fewer sales in the Toronto and Vancouver regions, CREA said.
Nationally, sales are down 11.9 per cent from a year ago, dragged down by an 8.8-per-cent sales decline in Vancouver and a 40.7-per-cent decline in Greater Toronto.
In Toronto, the average price of $746,218 is still 5 per cent higher than a year ago. But it has fallen by about 19 per cent since April, when Ontario's government announced a slate of new measures to cool the housing market.
Those measures included a 15-per-cent foreign speculator's tax and an expansion of rent controls in the Greater Golden Horseshoe Area, which includes Greater Toronto, Hamilton-Burlington and some surrounding areas.
But prices are falling beyond Toronto and its surroundings, with month-to-month price declines in Calgary, Edmonton, Saskatoon, Victoria and Quebec City, among others. In all, 16 of the 26 major markets covered in CREA's report saw price declines in July.
"The overall Canadian housing market is now in its fourth month of what we expect to be a soft landing, with rising mortgage rates and more stringent mortgage regulation holding demand back broadly across Canada," wrote TD Bank economist Diana Petramala.
"Mortgage rates are expected to continue climbing with the Bank of Canada likely to hike its policy rate three times in the next year and a half. As such, housing affordability is likely to deteriorate broadly across Canada."
Vancouver prices bounce back
Although sales fell on a year-on-year basis once again in Vancouver, prices are on the rise again in Canada's priciest city for real estate. The average price of $1.029 million is 2.2 per cent higher than a year ago.
The city's real estate board credits a shortage of new home supply, and a strong condo segment, for rising prices.
No longer sellers' markets
CREA says Canada's housing market is in "balanced" territory these days. The national sales-to-new listings ratio was 53.5 per cent. Any number between 40 and 60 per cent suggests a balanced market.
But that's down from the high-60-per-cent range in the first quarter of this year, CREA notes.
"In the Greater Golden Horseshoe region, housing markets that recently favoured sellers have become more balanced, with some beginning to tilt toward buyers' market territory," CREA said in a statement.
But the association noted that home sales in Greater Toronto declined by the smallest amount since the new rules were announced in April.
"This suggests sales may be starting to bottom out amid stabilizing housing market sentiment," CREA chief economist Gregory Klump said.
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