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The number of homes sold in Canada dropped by 14 per cent in April compared with the same period in 2017, touching a seven-year low for the month, the Canadian Real Estate Association (CREA) said on Tuesday. The national average sale price tumbled by 11.3 per cent year-over-year to just over $495,000.

While the drop in home sales was in line with economists’ forecasts of a 15 per cent decline, home prices dived far lower than the consensus expectation of a seven per cent decrease.

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The double-digit drop in the average home sale price, however, should be taken with a grain of salt, as large home sales drops in Toronto and Vancouver skewed the figure significantly, Bank of Montreal Financial Group chief economist Douglas Porter warned.

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“Prices nationally are still nudging higher, albeit barely,” Porter wrote in a note to clients, citing, among other things, a 1.5 per cent increase in the MLS Home Price Index, which takes into account changes in the mix of homes sold.

Sales were down in 60 per cent of all markets, led by the Lower Mainland of British Columbia and southern Ontario.

WATCH: Toronto home sales drop by 39.5% in March compared to 2017

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On a monthly basis, home sales were down 2.9 per cent from March to April. However, the number of newly-listed homes also dropped by 4.8 per cent between March and April. Their decline puts the number of newly-listed homes 12 per cent below the 10-year monthly average, reaching a nine-year low for the month.

Tougher mortgage rules and climbing interest rates are both contributing to the market slowdown, according to economists.

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New rules by the Office of the Superintendent of Financial Institutions, the country’s federal financial regulator, mean that even borrowers with a down payment of 20 per cent or more face a stress test, as has been the case since January 2017 for applicants with smaller down payments who require mortgage insurance.

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The test is aimed at ensuring that Canadians don’t borrow too much and are able to keep paying their bills, even as interest rates rise. The rules mandate that financial institutions vet mortgage applicants using a minimum qualifying rate equal to the greater of their contractual rate plus two percentage points or the Bank of Canada’s five-year benchmark rate.

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The mortgage stress test and higher interest rates are reducing the purchasing power of many homebuyers, forcing Canadians to settle for cheaper homes they can afford with smaller loans.

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And the bar just rose higher for mortgage borrowers, when the central bank lifted the benchmark rate from from 5.14 per cent to 5.34 per cent on May 9 after all of Canada’s big banks raised their posted five-year fixed mortgage rates in recent weeks.

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In several local markets in and around Toronto and Vancouver, the impact of the stress test has been compounded by provincial policies aimed at cooling what was, until recently, breakneck home price growth. The measures, which include surtaxes on foreign homebuyers, helped to bring sales down by 33 per cent and 27 per cent, respectively, in both cities.

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In Toronto, for example, a 15 per cent levy on foreign homebuyers introduced in April 2017 appears to have triggered a quick realignment of listings and home prices in the city, according to a numbers breakdown provided to Global News by data analyst Shafquat Arefeen. The average sale price in Greater Toronto dropped to $804,584, down 12.6 per cent in April compared with the same month last year.

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However, markets across the country have felt the impact of rising interest rates and stricter mortgage rules.

“The Prairies generally remain ice cold,” Porter noted.

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Calgary appeared to be particularly hard hit, with sales activity down over 20 per cent year-over-year in April, while prices dipped slightly. Edmonton and Regina also saw price and sales drops from year-ago levels, while Saskatoon recorded a price drop of almost 5 per cent.

Still, rising oil prices might soon help those markets rebound, Porter said.

With files from the Canadian Press