Canada’s real estate industry is in trouble. According to the Canadian Real Estate Association, July marked the lowest in national sales.
The Association believes the slowdown in Vancouver may have spread to different parts of Canada.
The number of transactions in Canada between June and July had fallen by 1.3 per cent nationally. In July, a 2.9 per cent drop was noted. Fraser Valley and Greater Vancouver slipped at about 6.7 per cent and 14. per cent respectively in home sales.
Analysts said Vancouver is the one with the biggest issue for the downfall.
“The real eye-catcher is the fact that mighty Vancouver has been largely responsible for the recent cooling, with seasonally-adjusted sales now falling in five straight months, albeit from gaudy record levels at the turn of the year,” BMO senior economist Robert Kavcic wrote in a note to clients.
Despite the drop in sales, prices of homes continued to increase. The average price for a house in July reached about $480,743, a notable 9.9 per cent increase compared to the previous year.
“Where these two cities will go in the months ahead is where the story starts to get quite interesting,” Kavcic wrote.
“As noted, Vancouver has already seen its market loosen up quite a bit recently, and the new tax could pile on to take some momentum out of price growth.”
The newly-mandated 15% property tax on foreign buyers may also scare off possible real estate buyers from joining the fray this year.
According to TD Bank Economist Diana Petramala:
“TD Economics’ forecast assumes residential sales fall an additional 14 per cent to 20 per cent due to the tax, not only as foreign buyers leave the market, but as domestic players get spooked and move to the sidelines,” Petramala said.
“Overall, home prices are expected to fall by almost 10 per cent between now and the end of next year.”