Andrew Willis: In February, the Canadian housing market saw a 9% fall in sales from January, bringing volumes down to their lowest levels since 2012. Home prices are also down when compared to the same time last year, in fact, it’s the first annual decline in prices since 2009 and the only decline outside of a recession. The trends have renewed worries around a wobbly housing market and strengthened calls for tighter mortgage rules for prospective buyers. But in the right context, you may find that many of these fears are unfounded.
First of all, even with a steep monthly drop in sales levels, year-over-year declines are only at 4.4%, a similar figure to January. And if you take that month-over-month 9.1% figure and remove the heavier declines out West, specifically in Alberta and British Columbia, you'll find the combined sales for the rest of the country were actually up by 2.8% year-over-year. Secondly, on home prices, experts say the First-Time Home Buyer Incentive mentioned in the 2019 federal budget is likely to push home prices higher. And the increase in the Home Buyers' Plan to $35,000 may also push prices upwards.
Thirdly, there is a concern around rising interest rates widely feared to be the key catalyst that will cause a domino effect of market decline rates do not appear to be rising anytime soon. Our neighbors in the south certainly appear to have rates on hold for the year at least. Finally from a supply and demand perspective although new listings declined more than 3%. The Canadian Real Estate Association says that 70% of the cities in the country have balanced markets and they forecast that for the whole of 2019 resales may only fall 1.6% below 2018.
For Morningstar, I'm Andrew Willis.
