Home prices continued to decline across the country in July, according to Canadian Real Estate Association data released Wednesday.
The Ottawa-based group said the average price of a home sold last month was $353,147, a decline of 2% from a year earlier. The year-over-year decline in June was 0.8%.
“Prices are off their recent peaks in Greater Vancouver and Greater Toronto, but remain above year-ago levels in most markets,” the group said in a release.
Activity was up from the previous month in Kingston, Ont., Chilliwack, B.C., and Calgary, offset by fewer sales in Toronto, Newfoundland and Labrador, and Edmonton. Actual sales across the country were up 3.3% overall from a year ago.
Much of the decline in the national average can be blamed on Vancouver’s volatile market.
The city’s average sale price dropped more than 12% to $667,462 from $761,763 last year.
A senior economist at Royal Bank of Canada said the city’s lack of affordable homes is pulling down the market.
“We still believe that Vancouver is probably the most stressed market right now because of extremely poor affordability,” said RBC economist Robert Hogue.
“Plot the resale figures over the last year or so and you see a fairly significant decline in resales, so I think that this does the fit the definition of correction,” he said.
But a B.C. real estate economist said speculation of a market correction in Vancouver is unwarrwanted, as the economy continues to heal.
“Typically to see a price correction you need to see a macroeconomic shock — recession, very high unemployment, for example — or you need to see interest rates go up very dramatically in a short period of time. Both of those we don’t see on the horizon,” said Cameron Muir, the British Columbia Real Estate Association’s chief economist.
He said one-third of the market is first-time buyers, of which the market has no shortage.
“As long as we have first-time buyers that can get into the market to buy the homes from the people who are moving up, moving over, moving down, then the market should remain healthy,” Mr. Muir said.
Meanwhile, Toronto experienced a cooling, with prices increasing at a slower rate of 3.9% year over year, which BMO economist Douglas Porter called a “just-right” pace in a note Wednesday.
Mr. Hogue said the market across Canada is moderating and low resale numbers in the past three months were a result of compensation for a strong winter market and do not necessarily spell an impending pronounced correction.
“We believe that much of this easing was payback for a stronger-than-expected start to the year when warmer than usual weather this past winter and mortgage rate promotions by financial institutions provided a temporary boost to activity,” he said.
The Canadian Real Estate Association said tighter mortgage and lending regulations seemed to have cooled Canada’s national housing market, even in the bigger markets.
“Recent changes to mortgage regulations were widely expected to temper sales and prices in Greater Toronto and Greater Vancouver, and the data released today confirms that,” said Wayne Moen, president of the association, in a statement.
Finance Minister Jim Flaherty said Wednesday it may be too early to determine the extent of the impact of mortgage insurance reform, but that market moderation is a good thing.
“We want to avoid, obviously, the kind of thing that happened in the U.S. market, the Irish market and other markets in the Western economies with respect to their housing. So we want to have moderation,” he told The Canadian Press