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B.C. home sales expected to tumble in 2017: CREA

Falling affordability and tighter mortgage rules are expected to contribute next year to a drop in sales from record levels in both B.C. and Ontario, the Canadian Real Estate Association says.

CREA cites newly tightened mortgage rules for biggest decline in number of sales since 2012

While prices were higher, November saw the biggest monthly drop in home sales in more than four years, CREA says. (Steve Marcus/Reuters)

Home sales and prices in British Columbia can be expected to retreat in 2017, the Canadian Real Estate Association said Thursday.

Annual sales in the province are seen dropping by 12.2 per cent, with average sale price expected to fall by 7.8 per cent

"This largely reflects an anticipated decline in single family home sales activity at the higher end of the market — particularly in the Lower Mainland," CREA said in an update to its resale housing outlook.

Ontario sales are seen dropping by 2.7 per cent, with prices expected to grow by one per cent. 

"Transactions in B.C. and Ontario are anticipated to remain strong but fall short of this year's record levels due to deteriorating affordability, an ongoing shortage of affordably priced listings for single family homes and tightened mortgage regulations," CREA said.

Nationally, sales are expected to come in at 518,900 units next year, a drop of 3.3 per cent from the projected sales for 2016. Sales are seen easing in Saskatchewan, Nova Scotia, P.E.I., and Newfoundland and Labrador.

Conversely, CREA is forecasting sales in Alberta will go up by 3.5 per cent next year, although prices are expected to dip slightly..

TD Bank economist Diana Petramala said that on top of tighter mortgage regulations, mortgage rates have gone up since October. 

"Rising interest rates tend to slow the market with a one- to two-quarter lag," Petramala said in a commentary. "As such, the combination of these factors will work to cool the market through 2017 and 2018. However, the inertia related to tight conditions in Toronto and its surrounding areas should keep these markets going for a few months more."

November sales cool

CREA said the average selling price of a Canadian home in November was $489,591, a figure that has increased by more than seven per cent in the past year. The real estate group said it has noticed a cooling in sales activity, as there were more than 5.2 per cent fewer home sales in November than in the previous month. That's the biggest monthly drop in home sales in more than four years.

""November was the first full month in which the expanded stress-test was in effect for home buyers with less than a 20 per cent down payment," CREA president Cliff Iverson said.

"The government's newly tightened mortgage regulations have dampened a wide swath of housing markets, including places not targeted directly by the government's latest regulatory measures."

Sales were still strong in the Greater Toronto Area, but there was a pronounced slowdown in B.C.'s Lower Mainland.

"The drop in demand was spread across two-thirds of regional markets with Ontario markets being the only exceptions given the booming demand and tight inventory," TD's Petramala said. "Vancouver remained the weakest market with sales activity down 37 per cent from the year ago."

Those two cities continue to dominate any discussion of the national housing market, as high prices in both still skew the national average higher. If both cities are stripped out of the calculation, the national average house price drops to $361,260 last month.

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