According to statistics released today by The Canadian Real Estate Association (CREA), national home sales dropped in May 2016 after having set an all-time monthly record in April.

Highlights:

• National home sales dropped 2.8% from April to May.
• Actual (not seasonally adjusted) activity was up 9.6% compared to May 2015.
• The number of newly listed homes fell 3.2% from April to May.
• The MLS^® Home Price Index (HPI) rose 12.5% year-over-year in May.
• The national average sale price climbed 13.2% in May from one year ago; net of Greater Toronto and Greater Vancouver, it advanced 9.1% year-over-year.

The number of homes trading hands via Canadian MLS^® Systems fell by 2.8 percent month-over-month in May 2016 after having broken all previous monthly sales records in April.

Sales activity dropped in May from the previous month in about 70 percent of all markets, led by those in British Columbia and Ontario where the number of homes listed for sale has fallen to multi-year or all-time lows.

“National sales activity is still strong, even after coming off the record levels of the past couple of months,” said CREA President Cliff Iverson. “But, there are housing markets where sales continue to reflect a cautious mood among homebuyers and uncertainty about the local economy,” he added. “All real estate is local, and REALTORS^® remain your best source for information about sales and listings where you live or might like to in the future.”

“Many of the housing markets in BC and Ontario that led the monthly decline in national sales are also places where months of inventory have fallen to all-time lows,” said Gregory Klump, CREA’s Chief Economist. “This suggests a lack of supply may be starting to rein in sales amid a continuation of strong housing demand.”

Actual (not seasonally adjusted) sales activity was up 9.6 percent year-over-year in May 2016 and stood 15.1 percent above the 10-year average for the month of May.

The number of newly listed homes fell by 3.2 percent in May 2016 compared to April. New supply was down in about two-thirds of all local markets, led by the Fraser Valley, Victoria, Edmonton, Montreal and Quebec City.

The national sales-to-new listings ratio edged up to 64.8 percent in May 2016 – the ratio’s tightest reading since October 2009. A sales-to-new listings ratio between 40 and 60 percent is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.

The ratio was above 60 percent in about half of all local housing markets in May, virtually all of which are located in British Columbia, in addition to housing markets in and around Toronto and across Southwestern Ontario.

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

There were 4.7 months of inventory on a national basis at the end of May 2016, which is unchanged from April’s reading and the lowest level in more than six years. Months of inventory have been trending lower since early 2015, reflecting increasingly tighter housing markets in B.C. and Ontario. It currently sits at or below two months in a growing number of local markets in British Columbia, the GTA and environs and in Southwestern Ontario.

 Aggregate Composite MLS^® HPI rose by 12.5 percent on a year-over-year basis in May 2016, the biggest gain since February 2007.

For the fourth consecutive month, year-over-year price growth accelerated for all Benchmark property types tracked by the index.

Two-storey single family home prices continued to post the biggest year-over-year gain (+14.7 percent), followed by one storey single family homes (+12.7 percent), townhouse/row units (+11.6 percent), and apartment units (+8.6 percent).

While 9 of the 11 markets tracked by the MLS^® HPI posted year-over-year price gains in May, price growth among housing markets continues to vary widely.

Greater Vancouver (+29.7 percent) and the Fraser Valley (+31.7 percent) posted the largest gains, followed by Greater Toronto (+15.0 percent), Victoria (+13.9 percent), and Vancouver Island (+9.5 percent). By contrast, prices fell by -3.9 percent and -2.3 percent in Calgary and Saskatoon respectively.

Year-over-year price growth advanced further into positive territory in Regina (+3.4 percent) and strengthened further in Ottawa (+1.3 percent) and Greater Montreal (+1.9 percent). Home prices in Greater Moncton recorded their tenth consecutive year-over-year gain, rising 8.2 percent from where they stood one year earlier.

The MLS^® Home Price Index (MLS^® HPI) provides a better gauge of price trends than is possible using averages because average price is prone to being distorted by changes in the mix of sales activity.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets. The actual (not seasonally adjusted) national average price for homes sold in May 2016 was $509,460, up 13.2 percent on a year-over-year basis.

If these two housing markets are excluded from calculations, the average price is a more modest $375,532 and the year-over-year gain is trimmed to 9.1 percent.

Even then, this reflects a tug of war between strong average price gains in housing markets around the GTA and in British Columbia versus flat or declining average prices elsewhere in Canada. The average price for Canada net of sales in British Columbia and Ontario in May 2016 was down 0.7 percent year-over-year to $310,007.

Vancouver’s mayor says the city will impose a tax on property owners who don’t live in their residences as part of an effort to make housing more affordable, but Gregor Robertson acknowledges his council will have to figure out a way to work around a provincial government that has rejected previous efforts to tax empty houses.

After months of demanding action from the provincial and federal governments on the affordability crisis, Mr. Robertson said Tuesday he has no faith that the province in particular will intervene. He said city staff are looking at all options, even if it means navigating around the province, which has jurisdiction over such a tax.

The mayor said the city wants access to an estimated 10,000 empty houses in Vancouver, a figure based on data that city staff released in March. But he didn’t say how high he thinks the tax would have to be to persuade those owners to rent out their houses.

Mr. Robertson also did not explain how the tax would work, saying he was waiting for staff to come up with a detailed plan.

As the cost of housing in Vancouver has skyrocketed and the rental market has been squeezed, speculation has grown over how much foreign investment is driving the price escalation. But Mr. Robertson’s plan would tax all homeowners who do not live in the properties they own, from overseas buyers to snowbirds from elsewhere in Canada. Mr. Robertson did not detail how much time owners would have to spend in their homes to avoid the tax.

“We would love to have thousands of those homes in the rental market right now when there’s almost no vacancy and a real crunch on affordable housing,” he said. “We’d like to see more supply created from the empty homes that are just sitting there in the city.”

Mr. Robertson said he expected a report from city staff in coming weeks on best options for proceeding with the plan.

“We’re looking at what we might be able to do here at the city without the province’s help. There might be more limited options,” Mr. Robertson told reporters at City Hall during a break in a council meeting.

The mayor set a tight timeline for action, saying it is “imminent” because council takes a break from the end of July to September.

A year ago, Mr. Robertson sent a letter to B.C. Premier Christy Clark asking the province for a tax on luxury housing and measures to fine property owners who do not live in the units they own. Ms. Clark rejected the requests and suggested the city could find solutions in better land-use planning.

A B.C. Finance Ministry statement issued Tuesday did not respond specifically to Mr. Robertson’s vacancy-tax proposal, but said the B.C. government is examining a broad range of policy choices to help British Columbians access “appropriate housing in the short term” and that a plan will be presented when that work is done.

“It’s good to see Vancouver is considering what action it can take within its authority,” the statement said.

One of three councillors representing the Non-Partisan Association party on the council dominated by Mr. Robertson’s Vision Vancouver party said the NPA is generally supportive of the vacancy-tax idea, contingent on the details, but skeptical about the mayor’s timeline.

“I’m not sure we will be able to move forward by summer break,” Melissa De Genova said. “This is a huge issue. It’s an issue that needs to be approached cautiously. We need to consider the ramifications.”

She said Mr. Robertson’s enthusiasm raises some questions. “If the mayor is fired up and ready to go, I question why he hadn’t moved forward on this sooner.”

She also said, speaking for her NPA colleagues, that there may be merits to a regional, as opposed to a City of Vancouver, approach.

Ian Bailey - Globe & Mail

Commercial real estate sales in the Lower Mainland outpaced historical averages in the first quarter (Q1) of 2016, according to data from Commercial Edge, a commercial real estate system operated by the Real Estate Board of Greater Vancouver (REBGV).

There were 660 commercial real estate sales in the Lower Mainland in Q1 2016. This is a 26 per cent increase over the 524 sales in Q1 2015, and represents the most active quarter for commercial real estate in the last five years.

The total dollar value of commercial real estate sales in the Lower Mainland in Q1 2016 was $2.904 billion, which is 78.1 per cent above the $1.630 billion total in Q1 2015.

“The commercial market is picking up where it left off after a record-setting year in 2015,” said Dan Morrison, REBGV president. “We’re seeing steady demand across all major commercial real estate categories in our region.”

Q1 2016 activity by category

Land: There were 271 commercial land sales in Q1 2016, which is a 42.6 per cent increase from the 190 land sales in Q1 2015. The dollar value of land sales in Q1 2016 was $1.669 billion, a 118.3 per cent increase over $764 million in Q1 2015.

Office and Retail: There were 201 office and retail sales in Q1 2016, which is up 15.5 per cent from the 174 sales in Q1 2015. The dollar value of office and retail sales in Q1 2016 was $815 million, a 111.9 per cent increase over $384 million in Q1 2015.

Industrial: There were 151 industrial land sales in Q1 2016, which is up 16.2 per cent over the 130 sales in Q1 2015. The dollar value of industrial sales in Q1 2016 was $229 million, an 8.5 per cent decline from $250 million in Q1 2015.

Multi-Family: There were 37 multi-family land sales in Q1 2016, which is up 23.3 per cent over the 30 sales in Q1 2015. The dollar value of multi-family sales in Q1 2016 was $191 million, a 17.5 per cent decline from $231 million in Q1 2015.

Category definitions:
Office and Retail properties are defined by the zoning according to each municipality and must have a building on the site. This category includes: Office, office condo, retail, retail condo, shopping centre, gas station, car dealerships, banks, community centres, day care, educational facility, institutional, golf courses, movie theatre, hotel, churches, restaurants, truck stops and others.

Industrial properties are also defined by the zoning according to each municipality and must have a building on the site. This includes warehouses, warehouse bays and multi-bay warehouses.

Multi-Family properties include: nursing homes, high rises, low rises, and any condo or townhome properties containing four or more units with at least one zoned for commercial use.

Vacant Land includes properties that are holding properties, farmland, garden centres, redevelopment sites, land assembly sites, vineyards, etc.

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The overall level of risk to Canada’s financial system is largely unchanged from six months ago, the Bank of Canada said today in its biannual Financial System Review (FSR). While household vulnerabilities have moved higher, the ongoing economic recovery in Canada means that the overall risk remains the same. The Canadian financial system is resilient and functioning effectively.

The Bank continues to highlight two vulnerabilities related to Canadian households: the elevated level of household indebtedness and imbalances in some regional housing markets. A third vulnerability identified is the fragility of fixed-income market liquidity.

Strong regional divergences persist among housing markets. Job losses have increased financial stress for some highly indebted households in the regions most affected by low commodity prices. Meanwhile, in the greater Vancouver and Toronto areas, rapidly rising house prices and strong mortgage credit growth are increasing the share of highly indebted households. In these two markets, it is unlikely that economic fundamentals will justify continued strong price increases.

“This suggests that prospective homebuyers and their lenders should not extrapolate recent real estate performance into the future when contemplating a transaction,” said Governor Stephen S. Poloz.

The vulnerabilities described in the FSR could propagate shocks throughout the financial system if a major event were to trigger one of the identified risks. The most important continues to be a severe recession and an ensuing sharp increase in unemployment that impairs debt service and leads to a broad-based correction in house prices. The probability remains low as the economy continues to grow, supported by continued expansion in the United States, and accommodative monetary policy and fiscal stimulus in Canada.

Other key risks identified are a sharp increase in interest rates due to higher global risk premiums, stress emanating from China and other emerging-market economies, and a prolonged weakness in commodity prices.

Published twice a year, the FSR is intended to raise early awareness of the key vulnerabilities and risks to the Canadian financial system. It focuses on downside risks, rather than the most likely future path for the financial system.

The trend measure of housing starts in Canada was 191,000 units in May compared to 194,950 in April, according to Canada Mortgage and Housing Corporation (CMHC). The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

“Housing starts slowed in May, and are now on pace to reach 191,000 units in Canada — falling within the upper range of our housing market outlook forecast for the year,” said Bob Dugan, CMHC Chief Economist. “The decline we see in the trend is led by fewer multiple starts in urban areas, particularly in larger centres like Toronto.”

CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of the state of Canada’s housing market. In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multiunit segment of the market which can vary significantly from one month to the next.

The standalone monthly SAAR for all areas in Canada was 188,570 units in May, down from 191,388 units in April. The SAAR of urban starts decreased by 2.5 per cent in May to 170,432 units. Multiple urban starts decreased by 5.7 per cent to 110,834 units in May and the single-detached urban starts increased by 4.2 per cent to 59,598 units.

In May, the seasonally adjusted annual rate of urban starts decreased in British Columbia and the Prairies, but increased in Ontario, Atlantic Canada, and Québec. Rural starts were estimated at a seasonally adjusted annual rate of 18,138 units.

Canada Mortgage and Housing Corporation (CMHC) released today its annual Mortgage Consumer Survey. The largest and most comprehensive survey of its kind provides insights into the behaviours, attitudes and expectations of Canadians when acquiring, renewing or refinancing a mortgage.

“Understanding the way active Canadian mortgage consumers behave and what they are looking for allows mortgage professionals to provide better service and improve the overall customer experience” said Nathalie Fredette, Vice-President, Client Relationship Management.

Survey Highlights:

• Mortgage consumers are increasingly going mobile and turning to social media to gather mortgage information
• The use of social media to gather mortgage information is highest among firsttime buyers and with consumers using a broker to arrange their mortgage
• Consumers receiving advice on long-term mortgage strategies were almost two times more likely to totally agree they will recommend their mortgage professional to family and friends
• First time homebuyers are most likely to seek advice from family members and real estate agents
• Unforeseen costs are the most common cause for concern among first-time homebuyers

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The British Columbia Real Estate Association (BCREA) released its 2016 Second Quarter Housing Forecast today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to climb 12.3 per cent to a record 115,200 units this year, eclipsing the previous record of 106,310 units in 2005. Housing demand is expected to pull back by 8.3 per cent to 105,600 units in 2017. Strong economic fundamentals are expected to underpin the housing market and produce above average consumer demand through 2017. The ten-year average for the province is 83,000 MLS® residential unit sales.

“Robust employment growth and a marked increase in migration from other provinces is buoying consumer confidence and housing demand in most regions of the province,” said Cameron Muir, BCREA Chief Economist. “Record housing demand has depleted inventories in many urban areas, and the resulting imbalance between supply and demand has pushed home prices considerably higher.”

The average MLS® residential price in the province is forecast to increase 20.4 per cent to $766,600 this year and a further 3.4 per cent to $792,800 in 2017.

New home construction activity has ramped up to meet the extraordinary demand for housing. Waning inventories of newly completed and unoccupied units are being offset by a marked increase in the number of homes under construction. Total housing starts in the province are forecast to climb 20 per cent to 37,800 units this year, before edging back to 34,200 units in 2017.

Metro Vancouver* homes continue to sell at an unprecedented rate in communities across the region.

Residential property sales on the region's Multiple Listing Service® (MLS®) totalled 4,769 in May 2016, an increase of 17.6 per cent from the 4,056 sales recorded in May 2015 and a decrease of 0.3 per cent compared to April 2016 when 4,781 homes sold.

Last month’s sales were 35.3 per cent above the 10-year sales average for the month and rank as the highest sales total on record for May.

"Home sellers are becoming more active in recent months, although that activity is being outpaced by home buyer demand today," Dan Morrison, REBGV president said.

New listings for detached, attached and apartment properties in Metro Vancouver totalled 6,289 in May 2016. This represents an increase of 11.5 per cent compared to the 5,641 units listed in May 2015 and a 2.6 per cent increase compared to April 2016 when 6,127 properties were listed.

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 7,726, a 37.3 per cent decline compared to May 2015 (12,336) and a 2.3 per cent increase compared to April 2016 (7,550).

"Economic and job growth in Metro Vancouver is out performing most regions in the country. This is helping to underpin today’s activity," Morrison said.

The sales-to -active listings ratio for May 2016 is 61.7 per cent. This is indicative of a seller’s market.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12 per cent mark, while home prices often experience upward pressure when it reaches the 20 to 22 per cent range in a particular community for a sustained period of time.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $889,100. This represents a 29.7 per cent increase compared to May 2015.

Sales of detached properties in May 2016 reached 1,865, an increase of 8.2 per cent from the 1,723 detached sales recorded in May 2015. The benchmark price for detached properties increased 36.9 per cent from May 2015 to $1,513,800.

Sales of apartment properties reached 2,150 in May 2016, an increase of 34.4 per cent compared to the 1,600 sales in May 2015. The benchmark price of an apartment property increased 22.3 per cent from May 2015 to $485,000.

Attached property sales in May 2016 totalled 754, an increase of 2.9 per cent compared to the 733 sales in May 2015. The benchmark price of an attached unit increased 24.9 per cent from May 2015 to $632,400.