OTTAWA - Resales of Canadian homes dropped 6.2 per cent in May from April, with Toronto sales plunging 25.3 per cent, as new housing policy changes side-swiped demand and new listings rose again, the Canadian Real Estate Association said on Thursday.
The industry group said actual sales, not seasonally adjusted, were down 1.6 per cent from May 2016, while home prices were up 17.9 per cent from a year earlier, according to the group's home price index.
It was the first full month of housing resale data since the province of Ontario introduced a 16-point plan to rein in the hot housing market in Toronto, Canada's largest city, amid fears of a bubble.
The changes included a 15-per cent foreign buyers tax similar to one imposed in Vancouver in 2016.
"(The results) provide clear evidence that the changes have resulted in more balanced housing markets throughout the Greater Golden Horseshoe region (around Toronto),” said Gregory Klump, CREA's chief economist.
"For housing markets in the region, May sales activity was down most in the GTA (Greater Toronto Area) and Oakville. This suggests the changes have squelched speculative home purchases," Klump added.
The industry group said the drop in sales pushed the sales-to-new listings ratio out of sellers' territory and back into balance for the first time since late 2015.
The ratio fell to 56.3 per cent in May, down from 60.2 per cent in April and about 10 percentage points below the first three months of the year. A ratio between 40 and 60 per cent is consistent with a balanced housing market.
CREA also upgraded its forecast for sales and prices, saying it expects less of a slowdown in 2017 than it predicted three months ago given the strong first quarter.
Home sales were forecast to fall 1.5 per cent to 527,400 units this year and dip 0.8 percent in 2018. In March, CREA had forecast a 3 per cent drop in sales in 2017 and a 1 per cent decline in 2018.
The national average price was forecast to rise 7.4 per cent to $526,000 in 2017 and climb 1.8 per cent in 2018, CREA said. That's up from a March forecast for a 4.8 per cent price increase in 2017, but the 2018 forecast was trimmed from a previous 5 per cent expected increase.
CREA said some buyers may find themselves priced out of the market entirely in Toronto and Vancouver, where single family homes are in short supply.