Photo: James Bombales
Following a frosty February, Canadian home sales inched up in March and one of Canada’s biggest banks expects the market to continue picking up speed.
“We continue to believe that activity will improve… for a few reasons above and beyond the weather,” writes BMO Chief Economist Douglas Porter in a response to March home sales data from the Canadian Real Estate Association (CREA).
BMO had previously noted how weak February home sales were partly the result of rough weather.
Beyond warmer weather ahead, Porter highlights three factors that should be supportive of higher home sales on the heels of improved activity in March, when home sales inched up a seasonally-adjusted 0.9 percent from February.
First, Porter cites “rate relief,” noting that lower interest rates are once again boosting home sales.
Last year, it was expected the Bank of Canada would continue hiking its policy rate, which impacts mortgage interest rates, but that’s no longer the consensus given a weaker-than-expected performance from the Canadian economy.
The second encouraging factor is Canada’s growing population. “It’s not running at the fastest pace in a generation,” Porter points out. Population growth is a key driver for housing markets as it creates demand for accomodations.
And then there’s the 2019 federal budget, which was released last month and includes a number of housing-related measures.
Among them is a shared-equity mortgage scheme that will see the Canada Mortgage and Housing Corporation give qualified households up to 10 percent the value of a home in exchange for a corresponding equity stake in the property.
The feds also increased the amount of money first-time homebuyers can take out of their RRSPs to $35,000, up from $25,000.
“This year’s Federal Budget measures will eventually provide some modest support for demand as well,” says Porter.
For now, national home prices remain muted. The benchmark price of a Canadian home was $617,200 in March, up 0.8 percent from February but 0.5 percent below the same time last year, though Porter notes there is a stark divide from east to west.
“Put it this way, all 8 major reporting cities west of Ontario saw average prices decline from a year ago in March,” he writes. “In stark contrast, of the 18 reporting cities in central and eastern Canada, only 3 reported price drops.”
The differences between the Toronto and Vancouver area markets underscores this regional divergence.
In the Greater Toronto Area, the benchmark price of a home is $779,100, an increase of 1.5 percent over February and 6 percent compared to March 2018.
Greater Vancouver, on the other hand, saw the benchmark price dip 0.5 percent on a month-over-month basis to $1,011,200. That’s 7.65 percent off year-ago levels.
“[T]he regional divide is wide,” says Porter.
