According to the Royal LePage House Price Survey, released in early October, first-time homebuyer activity has fallen across Canada as a result of new mortgage regulations shutting some buyers out of the market completely.
In addition, the average price of a Canadian home has increased between 1.8 per cent and 4.8 per cent year over year in the third quarter of 2012. Across Canada, home sales fell from the numbers that we were seeing sold during the third quarter of last year.
“A drop in the number of homes trading hands typically precedes a period of softening house prices,” said the president and chief executive of Royal LePage, Phil Soper. “Where there is reduced demand, those who want to sell their homes adjust their asking price to stimulate interest. During the third quarter, unit home sales were positive in July, fell 9 per cent year-over-year in August and we are expecting September to show a decline as well. We had predicted this cyclical change early in the year, a natural market reaction after a period of strong expansion. Changes to mortgage regulations, which took effect on July 9th, accelerated the correction.”
The new mortgage rules were introduced in the middle of this summer, and they reduced the maximum amortization period for insured mortgages in Canada.
“While hard-hit in the short-term, first-time buyers will adjust to tougher mortgage qualifications,” continued Soper. “The dream of homeownership is very much alive among young Canadians. They may remain renters for sometime as they save; some will opt for less desirable neighbourhoods and some will purchase smaller homes. In the meanwhile, we will feel their absence in national sales statistics.”
For the full report as well as regional analysis, visit the Royal LePage website here.
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