As soon as the spring months hit, the Canadian housing market started to heat up, and May 2019 was no exception.
According to the Canadian Real Estate Association, Canadian home sales increased 1.9% in May compared to April 2019, hitting the 10-year average for the month. The Greater Vancouver Area and Greater Toronto Area led the way in sales growth.
On a year-over-year basis, national home sales climbed 6.7%, which is the largest year-over-year gain since summer 2016. Despite the strong activity in the housing market, the CREA is still drawing attention to the need to change the mortgage stress test.
“The mortgage stress test continues to present challenges for home buyers in housing markets where they have plenty of homes to choose from but are forced by the test to save up a bigger down payment,” says Gregory Klump, CREA’s Chief Economist. “Hopefully the stress test can be fine tuned to enable home buyers to qualify for mortgage financing sooner without causing prices to shoot up.”
New listings fell 1.2%, but the overall market is still balanced with 5.1 months of inventory. Supply is dropping though; there were 5.6 months of inventory in February 2019 and 5.3 months worth in April. The long term average is 5.3 months. If sales continue to outstrip new listings, we could see prices increasing in markets with low supply.
It’s important to remember that Canadian housing markets vary quite a bit when it comes to supply. For example, the Prairie provinces and Newfoundland & Labrador are oversupplied, while Ontario and Maritime areas are under supplied, which leads to more competition between buyers, causing significant price growth.
While some areas in Canada are struggling with a lack of supply, price growth for all housing types dropped slightly in May 2019. Townhome and apartment pricing remained relatively unchanged, dropping 0.2% year-over-year, while price growth for two-storey single-family homes fell 0.5% and one-storey single-family homes decreased 1.7%.
In the Greater Golden Horseshoe where supply is low, there was strong price growth across the board, except in Barrie and District where prices fell 6.1% year-over-year. Guelph had the greatest price growth, increasing 5.7%, followed by Niagara with a 5.4% jump. Oakville-Milton and Hamilton-Burlington saw price increases of 3.4%, and the GTA followed closely with a 3.1% bump.
The overall average price for all housing types in Canada was nearly $508,000, which is a year-over-year increase of 1.8%. If you remove the GTA and GVA from the equation, the average drops to just under $397,000.
The national average price is projected to settle around $485,000 by the end of 2019. This is a 0.6% drop compared to last year, but the CREA expects the average home price to increase in Ontario.