The Canadian Real Estate Association (CREA) released new forecasts, on Tuesday, August 3, 2010, reflecting a decrease of 6 percent from its initial 2010 existing home sales forecast. CREA is warning that talk of additional interest rate hikes, weaker economic growth and frugal consumer spending, could further slow home sales activity.
“National home sales activity is easing due to fewer and more cautious first-time home buyers,” said Chief Economist Gregory Klump. “With interest rates on the rise, housing affordability and home sales activity are expected to continue to erode over the second half of 2010. While the pricing environment is becoming more challenging, a recovering economy and job market will provide support for housing activity and prices.”
The Toronto Real Estate Board (TREB) reported a 34 percent year-to-year decline in July from the same month in 2009. Toronto is reporting its lowest level of home purchasing activity since 2002.
“The level of July sales remained below the expected long-term trend. The market has become more balanced following record monthly sales through most of the winter and early spring,” said the board president Bill Johnston.
Many brokers, in B.C. and Ontario are blaming the new harmonized sales tax (HST) for declining sales. Buyers and sellers seem to be confused about exactly how HST will affect transactions. The harmonized sales tax that went into effect for B.C. and Ontario on July 1, 2010 only applies to new home construction sales. It applies to the sale price, fees, services and commissions incurred during the real estate transaction. The HST does not apply to resale homes.
HST has been a part of the purchase process in Newfoundland, New Brunswick and Nova Scotia for many years. Despite HST and declining markets nationally, Newfoundland & Labrador reported the highest level on record for residential property sales for June 2010.
Canada’s third quarter home sales are forecast to reach 459,600, representing an annual decline of 1.2 percent nationally. The national-average home price is projected to climb to $331,600, compared to the association’s June projection of $325,400, although it is projected to ease by .9 percent to $328,600 nationally in 2011.
