Canadian Existing Home Sales (December 2018)

Rishi Sondhi, Economist | 416-983-8806

Date Published: January 15, 2018

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Home resales fall again in December 

  • Existing home sales fell 2.5% month-on-month in December, marking the fourth straight monthly decline and capping the weakest annual sales since 2012. Provincially, weakness was broad-based, with sales lower in nearly every province. Newfoundland and Labrador provided the lone exception, where sales advanced 8.4% during the month. Ontario (-2.4%) and B.C. (-4.1%) accounted for the lion's share of the decline, though there was also a notable drop in Nova Scotia (-14.3%). Meanwhile, activity was modestly lower in Quebec (-0.6%).
  • It was another ugly month for Vancouver's market, with sales tumbling 8% after an 11% drop in November. Other markets in B.C. were also weak, with sales down in Okanagan-Mainline (-4.2%), Victoria (-4.0%) and Vancouver Island (-15.5%). In contrast, sales increased in Fraser Valley (+3.5%). Notably, the speculation and vacancy tax was introduced in B.C. during late October, which may have disrupted activity across the province over the past two months.
  • Amidst uncertainties in the oil and gas sector, sales fell 1.4% in Alberta, driven lower by Edmonton (-3.1%). In contrast, sales in Calgary rose 1.2%, however, this followed three straight monthly declines. For the fourth quarter overall, sales in Alberta were down 4.6%
  • Sales were flat in Toronto in December after falling 4.7% in the prior month. Excluding Toronto, sales dropped 4% in Ontario, thanks in part to declines in Ottawa (-7.3%), and London (-6.8%). Conversely, sales were higher in Oakville-Milton (+10.4%) and Hamilton (+1.9%).
  • Looking across other major markets, sales declined in Regina (-15.8%), Winnipeg (-4.6%) and Halifax (-11.9%). On the flipside, sales increased in Saskatoon (+10.6%) while edging higher in Moncton (+0.4%). 
  • National new listings were almost unchanged (+0.2%) in December, with declines in close to half of all local markets offset by gains in the remainder.
  • With sales falling and new listings steady in December, the sales-to-new listings ratio eased to 53.3 – right around its long-term average. Provincially, ratios were highest in PEI (70.9) and Quebec (62.7). Meanwhile, oversupplied conditions persisted in B.C. (ratio at 45.3), Alberta (44.4), Saskatchewan (38.4) and Newfoundland and Labrador (31.7). In Ontario, the ratio was at 57.8, close to its long-term average and pointing to positive price growth going forward. Markets outside of the GTA were much tighter.
  • The average home price dropped for the third straight month in December (-0.8% m/m), while also heading lower (-5.0%) on a year-over-year basis.  
  • The quality-adjusted MLS home price index was up a modest 1.6% from a year-ago, decelerating for the second straight month. Price growth was robust in Montreal (+6.0% y/y) and Ottawa (+6.9% y/y), amid tight conditions. Prices continued to climb in the GTA, rising 3.0% year-over-year. Ample supply is restraining price growth in several markets, with benchmark prices falling year-over-year in Vancouver (-2.7%), Calgary (-3.2%), Edmonton (-2.0%), Regina (-5.2%) and Saskatoon (-1.2%). Meanwhile, price growth slowed to its softest pace since 2015 in Fraser Valley (+2.5%). 

Key Implications

  • Canada's housing market has lost some steam. December was a fairly weak month for housing activity, with sales and prices pulling back and no growth in listings. The broad-based nature of the decline suggests that rising interest rates and a tighter lending environment are impacting markets across the country. However, the recent drop in bond yields could provide some relief on this front in coming months. 
  • In the span of one month, the Bank of Canada changed its characterization of Canada's housing market to being "weaker than expected" versus "stabilizing". They also emphasized developments in Canadian housing markets as one of the main factors guiding the course of interest rate policy. On this score, December's weak report augurs for continued patience by policymakers.  
  • The roughly 4% decline in sales in the fourth quarter will weigh on residential investment and overall economic growth.
  • For 2019, our forecast calls for Canadian sales to basically tread water after 2018's plunge, as the impact of rising borrowing costs and tighter lending conditions are countered by strong population gains and on-going job growth. Still, the level of sales will remain relatively low compared to recent years. Prices should edge higher, given balanced conditions across the country, reflected in a national sales-to-listings ratio near its long-term average.