January home resales rise to highest since April
Sales of existing homes climbed to the highest level since April 2010 in January, led by strong markets in Vancouver and Toronto, the Canadian Real Estate Association (CREA) said Tuesday.
Sales, which were up 4.5 percent in January from December, may have risen partly because of the federal government's announcement last month that it will tighten mortgage rules, CREA said. The new rules start coming into effect on March 18.
"If last year can be used as any guide, sales activity may heat up further as we get closer to the date on which tighter mortgage regulations come into effect, especially in some of Canada's pricier markets," said Georges Pahud, CREA's president.
He also said the federal government should not make further changes to housing-market rules until the impact of the latest mortgage regulations are known.
"It will take some time before the longer-term impact of the latest mortgage regulations on the housing market can be known," Pahud said. "For that reason, further action shouldn't be taken until the impact can be measured."
The rules announced last month were the second series of mortgage changes introduced by the government in less than a year as it tries to prevent the boom and bust cycles that helped bring on the financial crisis in other countries.
New rules include reducing the maximum amortization period to 30 years from 35 years for new government-backed mortgages with loan-to-value ratios of more than 80 percent, as well as tightening refinancing and the use of lines of credit secured by homes.
TD Bank economist Diana Petramala said a short-lived growth spurt in home sales should be expected as buyers try to buy before the rules take effect, followed by a short period of weak sales.
In January, more than half of the local markets surveyed by CREA posted gains from the month before with a total of 39,481 homes sold, up from 37,773 in December. Sales were down 6.6 percent from January 2010, however.
Sales have risen in four of the past five months, which Petramala attributed partly to still-low interest rates.
"Going forward we still anticipate that interest rates will remain low through the first half of 2011," she said, noting that the Bank of Canada would likely start boosting rates in July.
That is slightly later than forecast by most of Canada's primary dealers -- the institutions that deal directly with the central bank as it carries out monetary policy. Seven of 12 dealers expect the central bank to resume raising rates in the first half of the year, according to a Reuters poll on Jan. 18.
"The rise in interest rates is expected to dampen housing activity in the coming months," Petramala said.
Canada's most expensive markets recorded strong sales gains in January. Toronto sales rose 4.9 percent, while Vancouver posted a 14.2 percent gain.
Six of 25 markets tracked by CREA fell, with Edmonton's 7.5 percent drop one of the steepest.
CREA said the national average price in January was $343,675, little changed from the past three months. But it was up 4.5 percent from a year earlier, partly because of a jump in the number of multimillion-dollar homes sold in the Greater Vancouver area, CREA said.
New listings rose 3.9 percent in January.