Price of average Canadian home rose to $496,500 in December, up 5.7% in 2017
Prices cooling off, but pace of sales is increasing, Canadian Real Estate Association says
The average selling price of a home sold in December rose to $496,500, the Canadian Real Estate Association said Monday, with the group's house price index slowing to its smallest pace of gains since February 2016.
The average price increased by 5.7 per cent in 2017, but the real estate agent's group says the average sale price number can be misleading, because it is skewed by high prices and sales volumes in big markets like Toronto and Vancouver.
For that reason, the group says its Aggregate Composite Multiple Listings Service House Price Index is a better gauge of the overall market, because it adjusts for types of housing and other seasonal factors.
But it, too, is showing signs of a slowdown.
The MLS HPI increased by 9.1 per cent in year up to December, showing the eighth consecutive monthly slowdown, and the lowest figure in almost two years.
"The deceleration in price gains largely reflects trends among Greater Golden Horseshoe housing markets tracked by the index, particularly for single-family homes," the group said.
While still up compared to 12 months earlier, the average selling price in December was three per cent below the peak it hit in April.
Toronto-Dominion Bank economist Rishi Sondhi said a big reason for that is the once red-hot Toronto market is having less impact on the national numbers after a number of policy changes aimed at cooling the market in Ontario.
"Much of the decline in average prices appears to be related to a shift in activity away from higher priced regions," said Sondhi. Greater Toronto Area sales fell to 18 per cent of all homes in Canada during the month — the lowest in a decade, said Sondhi.
While price gains are slowing, the opposite is happening in terms of the number of sales.
They increased for the fifth month in a row and have now fully recovered from a lull seen in the summer of 2017, CREA said.
December is not typically a strong month for home sales, but December's number came in 4.1 per cent higher than the same month a year earlier.
"Home sales in December were likely boosted by seasonal adjustment factors and a potential pull-forward of demand before new mortgage regulations came into effect this year" CREA's chief economist Gregory Klump said.
Bank of Montreal economist Robert Kavcic said he expects the closely watched average price number to maintain its upward trajectory, especially once recent rule changes aimed at slowing down speculation in the Toronto market work their way through the system.
"Much of the focus is now on the GTA, and we still view fundamental supply-demand factors as very strong, which should contain the price declines soon," said Kavcic.