The price of a resale property in Canada declined 1.8 percent year on year in June, the first annual drop since May 2020, as the market continued to fall drastically from February’s high under tighter financing conditions, according to statistics from Canada’s realtors released Friday.

According to Canadian Real Estate Association statistics, the national average selling price in Canada declined to C$665,850 ($511,092) in June from C$678,280 in the same month in 2020. Prices are down 6.4 percent for the month and 18.5 percent from their high in February.

“The June housing data show a market seriously wobbling, and that was before the Bank of Canada’s 100-bp (basis point) knockout blow,” said Robert Kavcic, senior economist at BMO Economics, in a report, adding that a larger correction is yet ahead.

The Bank of Canada stunned markets on Wednesday by raising the benchmark rate to 2.5 percent from 1.5 percent. It has raised interest rates four times this year in a bid to cool rising inflation, with money markets banking on rates reaching 3.5 percent by year’s end. 

According to the CREA, home sales in Canada plummeted 5.6 percent in June from May and are down 23.9 percent year over year, headed by Canada’s major cities.

The initial rush of 2022 has subsided, with sales down 19 percent in the second quarter compared to the first. In June, new listings increased by 4.1 percent, while the sales-to-new listing ratio fell to its lowest level since 2015.

According to CREA, “Almost three-quarters of local markets were balanced markets (in June) based on the sales-to-new listings ratio,”

According to BMO’s Kavcic, the fast move from February demonstrates how sentiment-driven the market was.

“The latest move the Bank of Canada should all but wash away any remaining froth,” he added.

The CREA house price index, which smooths out some of the volatility in average and median prices, fell 1.9 percent month on month but was still up 14.9 percent year on year.

Source: Reuters

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