Canadian home sales edged higher in October, supported by low interest rates. The strong momentum is expected to continue for the rest of the year and into the traditionally slower winter months.
The Strongest Home Sale Activity in Five Years
October home sales rose 0.7% month-over-month. Year-over-year, sales were up seven percent. This marks the sixth consecutive month of increased resale housing activity. October also represents the strongest sales activity in five years (October 2009) and stands in stark contrast to the quiet start of the year—which many believe was a result of the brutally cold winter. (Source: “Canadian home sales edge higher in October,” The Canadian Real Estate Association web site, November 17, 2014; http://crea.ca/canadian-home-sales-edge-higher-october-1.)
That said, sales of existing homes did not increase in all regions of the country. This is real estate after all—it’s about location, location, location. Overall, October sales were up on a year-over-year basis in about 70% of all local markets.
Canadian Home Prices Dominated by Three Cities
But, for the most part, Canadian real estate is still a tale of three cities: Toronto, Calgary, and Vancouver. In October, the national average price rose to $419,699. But if you take Vancouver and Toronto out of the equation, the average price rose 5.4% to $330,596.
By city, the average price of an existing home in Toronto rose nine percent to $587,505, and in Vancouver, prices were up 5.6% to $819,336. Housing prices were flat in Saskatoon, Ottawa, Greater Montreal, Halifax, and Greater Moncton. Prices were down 3.4% in Regina.
Mortgage Rates at Historic Lows
The continued strength in existing-home sales is being helped in large part by historically low mortgage rates. Potential homebuyers can get a five-year fixed mortgage rate, the most popular mortgage product in Canada, for less than three percent.
Still, that robust monthly sales growth could slow down if interest rates begin to climb. The higher-interest-rate environment will make it more difficult for some first-time homebuyers to qualify for a mortgage.
What Will the Bank of Canada Do?
Most don’t expect the Bank of Canada to raise its overnight lending rate (which impacts what banks charge for mortgages and loans) until late 2015. Not everyone agrees, though. The Organisation for Economic Co-operation and Development (OECD) thinks the Bank of Canada will raise its key interest rate to control inflation in May 2015. (Source: Quinn, G., “Bank of Canada to Raise Policy Interest Rate in May: OECD,” Bloomberg web site, November 25, 2014; www.bloomberg.com/news/2014-11-25/bank-of-canada-to-raise-policy-interest-rate-in-may-oecd.html.)
Stephen Poloz, the head of the Bank of Canada, will announce his next decision on borrowing costs on December 3. At Canadalend.com, we fully expect Governor Poloz to keep the overnight rate at one percent, where it has been held since September 2010.
Canadian Real Estate Going into 2015
As a result, the Canadian housing market will remain healthy as we enter 2015. Sales will be particularly strong in the four busiest markets: Calgary, Toronto, Hamilton, and Vancouver.
Whether you’re a first-time homebuyer, are looking to move up the property ladder, or are taking out a second mortgage, Canadalend.com can help you find the best mortgage designed to meet your financial and lifestyle needs. To take advantage of record-low interest rates and see what kind of mortgage you qualify for, contact Canadalend.com today, or apply online and a Canadalend.com mortgage specialist will contact you to set up an appointment at your earliest convenience.