UPDATE 2-Canada existing home sales fall, sales tax blamed

* Home resales in July fall 6.8 pct to 31,536

* Average price edges up 1 pct to C$330,351

* New sales taxes hurt sales in British Columbia, Ontario
(Adds details, analyst comments)

TORONTO, Aug 16 (BestGrowthStock) – Sales of existing homes in
Canada fell 6.8 percent in July, almost entirely because of
fewer sales in the big provinces of British Columbia and
Ontario, the Canadian Real Estate Association (CREA) said on
Monday.

The figures are the latest to show that Canada’s recently
hot housing sector is no longer playing a major role in the
country’s economic recovery. Signs of a slowdown in the housing
market have also cropped up in home-construction data and
new-home prices.

“It looks like anyone who wanted to buy a house this year
in Canada got their shopping done early,” said Doug Porter,
deputy chief economist at BMO Capital Markets.

CREA said a total of 31,536 homes changed hands in July,
for the smallest month-on-month decline in two months. Compared
with a year earlier, sales were down 30 percent.

CREA said the national average price in July was C$330,351
($317,645), edging up 1 percent from the same month last year.
The number of new listings fell 7.2 percent from the previous
month.

The slowdown in existing-home sales has been much forecast
due to stricter lending rules, rising interest rates, and the
introduction of harmonized sales taxes in Ontario and British
Columbia.

“A slowdown in demand in these two provinces had been
widely expected in July, as many purchases were brought forward
into the first half of the year in advance of the introduction
of the (harmonized sales tax),” CREA said.

The harmonized sales tax (HST) was introduced in July.
Sales in British Columbia were down 14.1 percent, and in
Ontario, they were off 8 percent. The two provinces accounted
for 85 percent of the change in national activity.

Scotia Capital economists Derek Holt and Gorica Djeric said
there were other factors outside of the HST that were weighing
on the housing sector as every province recorded a decline in
the volume of sales except Quebec.

“Rather, we’re going through a medley of influences that
are taking away the momentum from Canadian housing in more than
just a transitory response to the HST,” they said in a written
commentary.

“Tighter mortgage rules, higher variable mortgage rates,
and a return of supply in the resale and new home segments all
provide a fuller picture of why Canadian house prices are
correcting.”

Last month, CREA revised its forecast for Canadian home
sales to say they will decline 1.2 percent this year, not
increase as it previously forecast, but average prices should
climb more than expected. [ID:nN30166747]

Porter said the next several months will probably bring
“soggy” headline numbers for sales, “although with long-term
mortgage rates dropping, employment improved and prices
stabilized, the longer-term outlook is far from dire.”

Separately, RBC Royal Bank (RY.TO: ) cut some of its
residential mortgage rates by 0.10 percent on Monday. A posted
five-year closed mortgage was at 5.49 percent, effective
Tuesday.

($1=$1.04 Canadian)
(Reporting by Ka Yan Ng; Editing by Peter Galloway)

UPDATE 2-Canada existing home sales fall, sales tax blamed