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The volume of homes sold in Canada continued to slide, hitting a five-year low in May, data released by the Canadian Real Estate Association (CREA) on Friday shows. Activity was virtually unchanged compared with April, with sales edging down 0.1 per cent, month over month.

Actual, non-seasonally adjusted home sales dropped 16.7 per cent in May compared with the same month last year, marking the lowest level in seven years for the month.

The national average home price was down 6.4 per cent compared with May of last year, the numbers also show.

“This year’s new stress-test became even more restrictive in May, since the interest rate used to qualify mortgage applications rose early in the month,” said Gregory Klump, CREA’s chief economist.

The Bank of Canada raised the benchmark rate used to assess mortgage applicants in Canada on May 9 after all six of the country’s big banks raised their advertised rates for five-year fixed mortgages in prior weeks. The qualifying rate rose from 5.14 per cent to 5.34 per cent.

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Homebuyers with less than a 20 per cent down payment seeking an insured mortgage must qualify at the central bank’s benchmark five-year mortgage rate.

And as of Jan. 1, buyers who don’t need mortgage insurance are required to prove they can handle payments at a qualifying rate of the greater of the central bank’s five-year benchmark rate or two percentage points higher than the contractual mortgage rate.

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CREA lowered its national home sales forecast for this year due to weaker sales in B.C. and Ontario. The industry association says it now expects home sales this year to fall 11 per cent compared with a year ago to 459,900 units this year. That’s a bigger drop than the 7.1 per cent decline the association had predicted last March.

“Policymakers wanted a cooldown in activity — well they got that, and then some,” BMO economist Robert Kavcic wrote in a note to clients after the release.

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Price trends

The average price of a home in Canada was just over $496,000 in May, down 6.4 per cent compared with last year. Excluding the Greater Toronto and Greater Vancouver areas, however, the average price was around $391,100, down just two per cent.

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Looking at benchmark, rather than average, home prices offered up a slightly rosier picture. So-called benchmark home prices are adjusted based on changes in the mix of residential properties sold.

Benchmark prices managed to record a small increase, inching up one per cent in May 2018. But that was still the smallest gain since the recession of 2009.

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Price trends remained markedly different for different types of properties, with condos up 12.7 per cent in May, townhouses up 4.9 per cent and two-storey single family homes down 4.7 per cent compared with year-ago levels.

Markets in the Greater Toronto Area (GTA) and Niagara region weighed significantly on the national price figures, with year-over-year price drops in Greater Toronto (-5.4 per cent), Oakville-Milton (-5.9 per cent) and Barrie (-6.3 per cent).

Guelph, on the other hand, was a rare exception, with prices up 3.8 per cent compared with May of last year.

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Prices in Vancouver and British Columbia’s Lower Mainland were up considerably compared with last year (11.5 per cent and 14.4 per cent, respectively), but virtually flat compared with April in the wake of stepped-up provincial measures like taxes on foreign buyers and vacant homes.

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In the Prairies, prices were little changes in Calgary (-0.5 per cent) and Edmonton (-0.9 per cent), while Regina and Saskatoon recorded larger drops compared with last year (down -6.2 per cent and -2.7 per cent, respectively).

In Ottawa and Montreal, which have been bucking the national trend in recent months, prices were up 8.2 per cent and 6.7 per cent year-over-year, respectively.

Sales trends

Selling a home is becoming trickier across Canada, the data suggests. The volume of home sales in May was lower than last year in 80 per cent of local markets and particularly so around the Lower Mainland and in southern Ontario.

And sales remained steady, despite a 5.1 per cent increase in the supply of newly listed homes, something that put further downward pressure on prices. The ratio of new listings compared with sales now stands at 50.6 per cent, which economists define as a “balanced market” in which neither home sellers nor home buyers have the upper hand.

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In another sign of slowing sales activity, the number of months of inventory, rose to 5.7 months. That’s the amount of time it would take to sell all currently listed properties at the current pace of sales activity. The number of months of inventory reached a three-year high, but remains close to Canada’s long-term average of 5.2 months.

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With files from the Canadian Press