Rush to beat the HST could boost June home sales

TORONTO — Home sales could be stronger this month as buyers in two of Canada’s busiest real estate markets rush to close deals before a new regime tax kicks in, says the chief economist Canadian Real Estate Association.

TORONTO — Home sales could be stronger this month as buyers in two of Canada’s busiest real estate markets rush to close deals before a new regime tax kicks in, says the chief economist Canadian Real Estate Association.

After that, sales levels will likely drop back to lower levels like those reported in May, Gregory Klump said Wednesday as CREA released its latest monthly sales figures.

“It’s going to be a bit of a choppy ride between now and the second half of this year, so there may still be some pull forward in June with respect to people getting in in advance of the coming (harmonized sales tax) in B.C. and Ontario,” Klump said.

The harmonized sales tax starts July 1 in both provinces and will apply to real estate services, which had previously been exempt from provincial sales taxes. It will also increase taxes on sales of new homes over $400,000.

Meanwhile, home sales in May, usually the busiest month for real estate, took a plunge from April as buyers hurried to get in ahead of higher mortgage rates and stricter lending rules, according to CREA statistics released Wednesday.

Seasonally adjusted home sales in May departed from historical averages to drop by 9.5 per cent nationally from near-record activity the month before.

“It’s a shifting forward of sales,” Klump said.

Klump said the combination of tighter mortgage regulations — which now require all homebuyers to qualify for a standard five-year, fixed-rate mortgage — and rising interest rates pulled a number of sales forward into April that might otherwise have taken place later in the year.

The Bank of Canada’s signal in April that it was no longer committed to keeping interest rates at historic lows and the coming HST also pulled sales forward, Klump added.

CREA said home sales fell 4.3 per cent compared to May 2009, while new home listings rose 16.6 per cent from May 2009 but were down when compared with April.

The seasonally adjusted number of new listings dropped by four per cent from April, marking the first monthly decline in eight months. New listings had been climbing sharply, rising from a four-year low last September to the second highest-level ever in April.

Home prices were up 8.5 per cent in May, but that was a slower increase than has been seen over the past nine months.

Pascal Gauthier, a senior economist at TD Economics, said pent-up demand from the recession has now been fully absorbed and is no longer providing a boost to sales. He predicted that average home prices will slow as early as this month and pull back by about seven per cent from peak levels by the end of 2011.

Economists have widely predicted a slowdown in the housing market during the second half of the year. Many buyers hurried to close in late 2009 and the first half of this year to take advantage of record low interest rates.

Douglas Porter, deputy chief economist at BMO Capital Markets, said after sales “ran into a wall” in May, activity is “straddling the fine line between a sellers’ and buyers’ market.”

“Life in the fast lane is over for Canada’s housing market. Now the question is whether it will stay in the middle lane or brake even more aggressively,” he said.

“We suspect it will brake harder, although the ongoing revival in employment will likely keep the housing market from veering onto the shoulder.”

May’s drop in sales activity was seen in more than 70 per cent of local markets, but the lower national figure was dragged down primarily by fewer sales in Toronto, Vancouver and Ottawa.

Klump said statistics gathered by the association suggest that home supply and demand was more balanced in some major markets in May, giving home buyers more choice and more time to purchase a house.

“It’s not a matter of throwing your house on the market asking a king’s ransom, expecting multiple offers to come in over your asking price any more, that’s in the rear view mirror,” he said.

The total number of homes listed for sale on the MLS in May was up 5.4 per cent from last year, when the supply of homes for sales had started to decline.

However, he added, the number of newly listed homes will retreat in response to rising prices and a more competitive sales environment.

Klump said the outlook for the Canadian economy, employment and mortgage market trends remain upbeat, so the market will remain balanced and Canada will avoid a U.S.-style home price correction.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Conservative leader Erin O’Toole holds a press conference on Parliament Hill in Ottawa on Tuesday, April 6, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Conservatives plan to introduce $20-per-tonne carbon price in climate plan

OTTAWA — Conservative Leader Erin O’Toole is pitching a $20-per-tonne carbon price… Continue reading

(File photo contributed by Red Deer Public Schools)
Red Deer Public Schools say no to piloting new curriculum

Alberta Teachers’ Association support boards

Education Minister Adriana LaGrange says she has not received an official request from any other school board for a similar move to online learning. (Advocate file photo)
’Operational pressures:’ Calgary schools shift to at-home learning for grades 7 to 12

School boards can ask to move online for a number of reasons

In this photo taken Sunday, May 17, 2020, U.S. and Canadian flags fly atop the Peace Arch at Peace Arch Historical State Park on the border with Canada in Blaine, Wash. THE CANADIAN PRESS/AP/Elaine Thompson
A electric car is seen getting charged at parking lot in Tsawwassen, near Vancouver B.C., April, 6, 2018. File photo by THE CANADIAN PRESS/Jonathan Hayward
‘Wrong signal:’ Federal ministers protest Saskatchewan’s electric vehicle tax

Two federal ministers are protesting Saskatchewan’s plan to bring in a tax… Continue reading

Deputy Prime Minister and Minister of Finance Chrystia Freeland responds to a question during Question Period in the House of Commons Tuesday December 8, 2020 in Ottawa. Canada’s charities are looking to next week’s federal budget with hopes the Liberals will extend their sector a helping hand as they face the possibility of a prolonged and protracted road to recovery even after the economy reopens. THE CANADIAN PRESS/Adrian Wyld
Charities hope Liberals’ budget lends helping hand as sector eyes long recovery

OTTAWA — Canada’s charities are hoping the Liberals extend them a helping… Continue reading

Deputy Chief Public Health Officer Howard Njoo responds to a question about vaccines during a weekly news conference, Thursday, Jan. 14, 2021 in Ottawa. Njoo says a faster vaccine ramp-up alone would likely not have thwarted the third wave of COVID-19 in many parts of the country. THE CANADIAN PRESS/Adrian Wyld
Faster vaccines alone could not have stopped third wave: deputy public health officer

A top federal public health official says a faster vaccine ramp-up alone… Continue reading

WestJet president and CEO Ed Sims addresses the airline’s annual meeting in Calgary, Tuesday, May 7, 2019. THE CANADIAN PRESS/Jeff McIntosh
WestJet CEO Ed Sims finds Air Canada aid package ‘bittersweet’ as talks drag on

OTTAWA — WestJet CEO Ed Sims says the federal government’s aid package… Continue reading

British Columbia Premier John Horgan (centre, blue jacket) is drummed into the Lower Post Residential School by Kaska drummers in Lower Post, B.C. on Orange Shirt Day in a 2019 handout photo. A former residential school building known as a place of pain and fear for residents of the remote British Columbia community of Lower Post will be demolished and replaced after decades of lobbying efforts by local Indigenous leaders. The federal and B.C. governments say construction on a new $13.5 building project is set to start in June and expected to be complete next year. THE CANADIAN PRESS/HO-Manu Keggenhoff MANDATORY CREDIT
Residential school building at Lower Post, B.C., to be demolished, replaced

VICTORIA — A former residential school building in the remote British Columbia… Continue reading

A 60-year-old COVID-19 patient fights for his life, desperately gasping for air as head intensivist Dr. Ali Ghafouri, centre, provides life saving medical care in an emergency situation in the intensive care unit at the Humber River Hospital during the COVID-19 pandemic in Toronto on Tuesday, April 13, 2021. The patient was intubated and put on a ventilator successfully. THE CANADIAN PRESS/Nathan Denette
‘Sicker and younger’: Toronto ICU copes with pressure during third wave of pandemic

TORONTO — Intensive care nurse Jane Abas is assessing her patient, checking… Continue reading

FILE - NHL Commissioner Gary Bettman speaks during the “Topping Off” ceremony of the New York Islanders new home, the UBS Arena at Belmont Park in Elmont, N.Y., Friday, Oct. 9, 2020. THE CANADIAN PRESS/AP-Mary Altaffer
Islanders close to selling out inaugural season at UBS Arena

Arena capacity of about 17,000 for hockey

Most Read