MNI:Canada Dec Home Resales -2.5%; Y/Y Price Growth Slows Down

By Yali N'Diaye      

     OTTAWA (MNI) - Canada's existing home sales fell for the fourth consecutive

month in December, posting a 2.5% decrease from the previous month, data from

the Canadian Real Estate Association showed Tuesday.

     On a 12-month unadjusted basis, sales plunged 19%, the largest drop since

last March, although the comparison likely suffered from a negative base effect.

The government introduced more stringent mortgage-qualification rules in January

2018, leading home buyers to move purchases forward and boosting sales in

December 2017.

     Still, the persistence and acceleration of monthly declines since September

following a short-lived summer recovery highlights the weakness of the housing

market in the face of tighter monetary policy and more demanding mortgage stress

tests, while the oil price slump is weighing on the country's economic outlook,

including residential investment, particularly in oil-rich regions.

     In fact, the higher number of months of inventory, which rose to 5.6 in

December from 5.4 in November nationally, was led by Prairie provinces, where it

is "far above" the long-term average. Instead, the measure remained well below

the long-term average in Ontario.

     "Housing activity has recently been weaker than anticipated and is expected

to remain soft" through 2020, the Bank of Canada said in its January 9 Monetary

Policy Report. It added, "the combined effect of tighter mortgage guidelines and

higher interest rates has been larger than previously estimated."

     In December, sales decreased in 60% of markets, CREA said.

     Listings, meanwhile, were little changed (+0.2%), leading to a decrease in

the sales-to-listings ratio to 53.3% from 54.8% in November.

     On the price front, the Aggregate Composite MLS Home Price Index rose 1.6%

year-over-year in December, the smallest increase since last June, after rising

2.0% in November. It edged down 0.3% on the month.

     The national average price was down 0.8% on the month. On a 12-month

unadjusted basis, it fell 4.9%.

     Looking ahead, Fitch Ratings reported Tuesday that home price growth is

likely to slow to 0.5% in 2019 and 2020. However, it still warned that Vancouver

and Toronto remain "vulnerable to a more severe price correction in the event of

an economic stress."

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

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