Summary of the CDN home sales activity across Canada till the end of March

Information provided by Sean Dhillon - Manager, Mortgage Specialist, Vancouver Island, TD Canada Trust

Overall as rates continue to decline, and they have dropped quite a bit in the past month, then the high home sales activity will continue in 2017.

Data Release: Canadian homebuyers brave the colder weather in March

· Neither higher mortgage rates nor colder-than-normal weather managed to slow the Canadian housing market in March. Canadian existing home sales rose 1.8% m/m in March or 6.6% from a year ago, and were at their highest level on record.

· Listings rose by more than sales (2.5% m/m), bringing the sales-to-listings ratio down a touch to 67.4%, from 68.3% in the prior month. However, the housing market remained well entrenched in seller's territory and upward pressure on home prices remained strong. The average sales price rose 8.2% year-over-year to reach $549,000, while home prices on a quality adjusted basis were up by 18.6% from last year – the fastest annual gain since the index was constructed in 2005. The speed of apartment prices (+16.3% y/y) is quickly catching up to that of single-family detached homes (+19.6%).

· The Greater Toronto Area (GTA) remained one of the hottest markets across the country, with home price growth topping 32% y/y on an average basis and 29% y/y on a quality adjusted basis. But, demand seems to be moving further out of the city center and into what were once more affordable markets. Sales were up just 0.4% in the GTA in March, but 2.6% across the rest of Ontario. Average home prices were up by over 30% in almost half of the markets in Ontario.

· Elsewhere, market activity was more subdued with the MLS composite home price index up moderately in Regina (+1.7%), Ottawa (+4.0%), Montreal (+3.3%) and Moncton (+4.7%), but still down in Calgary (- 1.2%) and Saskatoon (-1.5%) on a year-over-year basis. Meanwhile, home prices in Vancouver (+12.8% y/y) have retraced half of the loses experienced since August 2016 on a quality adjusted basis. However, the pick-up in prices in Vancouver is more of a reflection of tight market conditions, with listings tumbling to near-record low levels in recent months. Existing home sales were still down 37% from year ago levels in March. Key Implications · All eyes appear focused on the Ontario housing market as prices continue to race ahead of underlying economic fundamentals, such as population and household incomes. The speed at which home prices are rising have become a cause for concern with unsustainable home price growth at least in part attributed to speculative activity.

· The key question is however, "what will stop it?". As we look into the rest of 2017, the economic drivers are supportive of a continued acceleration in housing activity. The economy appears to be on a better footing, while interest rates have come down in the last month from their post-U.S. election peaks. The best available 5-year fixed mortgage rate is down 10 basis points from a month ago. Should the lower rates persist, home price growth could top 25% this year in Ontario, putting the onus on policy makers to take some action which could come as early as Ontario’s Budget Plan 2017, scheduled to be tabled on April 27th.

· As for the rest of the country, low interest rates will help offset the impact of relatively modest economic conditions and past changes to mortgage insurance qualification guidelines through most of 2017. Having said that, housing activity is likely to hold up given it’s more sustainable pace than that in Ontario as of late.

Sean Dhillon, Senior Manager, Mobile Mortgages TD Bank 250-818-1943