Canadian home sales in October ticked higher compared with September, the third consecutive monthly increase.
The Canadian Real Estate Association said Wednesday the number of homes sold through its MLS system in October was up 0.9 per cent from the previous month, led by the Toronto region and the Fraser Valley in B.C.
TD Bank senior economist Michael Dolega said the report corroborates the notion that the Canadian housing market continues to manoeuvre a soft landing.
“Markets in Ontario remain vulnerable given affordability issues and lingering uncertainty regarding policies, but it would appear that the worst is behind the province, with some stability likely in store in the near- to medium-term,” Dolega wrote in a note to clients.
The increase in sales came as the number of newly listed homes slipped 0.8 per cent in October following a jump of more than five per cent in September.
The national sales-to-new listings ratio rose to 56.7 per cent in October from 55.7 per cent in September. CREA said a national sales-to-new listings ratio of between 40 per cent and 60 per cent is generally consistent with a balanced market.
Compared with a year ago, the number of homes sold in October fell 4.3 per cent.
The national average price for a home sold in October was $505,937, up five per cent from a year ago. Excluding Greater Vancouver and Greater Toronto, the average price was just over $383,000.
Meanwhile, the Teranet-National Bank composite house price index in October fell 1.0 per cent compared with September, the second consecutive monthly decline and the largest since September 2010.
The composite index for October was up 10.0 per cent from a year ago, the smallest 12-month rise since June 2016.
Home sales in Canada hit a fevered pitch in the spring of 2017 before the Ontario government moved to cool the market in and around Toronto with the introduction of measures including a tax on foreign buyers like the one put in place last year in Vancouver.
The market has also seen two rate increases by the Bank of Canada that have prompted an increase in the prime lending rates at the country’s big banks, with stricter lending rules set to come into place next year.
In a report Wednesday, DBRS said mortgage borrowers in Canada could be shocked at their five-year renewal to find their mortgage payments are going up as rates begin to rise.
“Over the last three decades, Canadian households have generally benefited from lower rates and have not had to adjust their spending patterns to cope with higher mortgages rates,” the debt rating agency said.
CIBC deputy chief economist Benjamin Tal said the combination of higher interest rates and regulatory changes will work to reduce purchasing power, but the impact will probably be short-lived.
“The level of activity is likely to stabilize and perhaps soften in the coming quarters as markets adjust to recent and upcoming regulatory changes,” Tal wrote in a report.
“But when the fog clears it will become evident that the long-term trajectory of the market will show even tighter conditions. The supply issues facing centres such as Toronto and Vancouver will worsen and demand is routinely understated.”
Tal said that without significant change in housing policies and preferences, there is nothing in the pipeline to alleviate the pressure.