The number of homes sold in March plunged nearly a quarter and the average price of a Canadian home sold last month was just over $491,000, a 10-per-cent drop in the past year, according to the latest market survey released by the Canadian Real Estate Association.
Excluding Canada’s two most expensive real estate markets – the Greater Vancouver and Greater Toronto areas – the national average price would be $383,000.
Activity was below year-ago levels in more than 80 per cent of all local markets, including every major urban centre except Montreal and Ottawa, with the vast majority of year-over-year declines well into double digits, the survey showed.
Recent mortgage rule changes have made home buyers and sellers increasingly uncertain about the outlook for home prices, said CREA President Andrew Peck.
The federal government introduced the changes in December 2015 worried about the red-hot housing markets in Toronto and Vancouver.
Under the new rules, which came into effect last year, anyone buying a home that costs $750,000 would have to pay a minimum down payment of $50,000: five per cent of $500,000, plus 10 per cent of $250,000.
Homes that cost more than $1 million were not affected by the changes, as they already required a 20 per cent down payment to qualify for mortgage loan insurance offered by Canada Mortgage and Housing Corporation, the federal housing authority.
“Recent changes to mortgage regulations are fueling demand for lower priced homes while shrinking the pool of qualified buyers for higher-priced homes,” said Gregory Klump, CREA’s chief economist. “Given their limited supply, the shift of demand into lower price segments is causing those sale prices to climb.”
That means that “affordably priced” homes are becoming less affordable while mortgage financing for higher priced homes remains out of reach of many aspiring move-up homebuyers, Klump said.