National home sales fell 1.3% from June to July in Canada, the third month in a row that transactions have fallen, and fell by 2.9% year on year, the largest since 2013.

The data from the Canadian Real Estate Association (CREA) also shows that the national average sale price was up 9.9% in July year on year but when Greater Toronto and Greater Vancouver are excluded from the figure this dropped to 7%.

Sales activity was down from the previous month in slightly more than half of all markets in July, led by Greater Vancouver and the Fraser Valley. Transactions in these two markets peaked in February of this year, and have since then dropped by 21.5% and 28.8% respectively.

According to CREA president Cliff Iverson much of the national sales decline in recent months reflects slowing activity in B.C.’s Lower Mainland area. ‘National sales and price trends continue to be heavily influenced by a handful of places in Ontario and British Columbia and mask significant variations in local housing market trends and conditions across Canada,’ he explained.

Gregory Klump, CREA’s chief economist, said that the figures suggest that sales are being reined in by a lack of inventory and a further deterioration in affordability. He pointed out that the new 15% property transfer tax on Metro Vancouver home purchases by foreign buyers took effect on 02 August so it will take some time before the effect of the new tax on sales and prices can be observed.

A breakdown of the figures shows that actual, not seasonally adjusted, sales activity was down 2.9% year on year July 2016, the first annual decline since January 2015 and the largest since April 2013.

In line with softening activity in the Lower Mainland, year on year increases have been losing momentum since February 2016. Sales were down from levels one year earlier in about 60% of all Canadian markets, led by Greater Vancouver, the Fraser Valley, Calgary and Edmonton.

The number of newly listed homes rose by 1.2 percent in July 2016 compared to June. While new supply climbed in fewer than half of all local markets, increases in Greater Vancouver and the Fraser Valley, Greater Toronto, Calgary and Edmonton outweighed declines in smaller markets.

With sales down and new listings up, the national sales to new listings ratio eased to 61.6% in July 2016, its second monthly decline following its peak of 65.3% in May. A sales to new listings ratio between 40% and 60% 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% in about half of all local housing markets in July, virtually all of which continue to be located in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario.

The CREA report points out that 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 4.6 months of inventory on a national basis at the end of July 2016. This is unchanged from readings in each of the previous two months and continues to indicate a tight balance between supply and demand for homes.

The number of months of inventory has trended lower since early 2015, reflecting increasingly tighter housing markets in B.C. and Ontario. It currently sits near or below two months in a number of local markets in British Columbia and in and around the GTA. Indeed, some regions in the GTA are down to just a couple of weeks of inventory.

The Aggregate Composite MLS® HPI rose by 14.3% year on year in July 2016, the biggest gain since November 2006 and for the sixth consecutive month, year on year price growth accelerated for all property types tracked by the index.

Two storey single family home prices continued to post the biggest annual gain at 15.9%, followed by town house/row units at 15.3%, one storey single family homes at 14.3% and apartment units at 11.1%.

While prices in nine of the 11 markets tracked by the MLS® HPI posted year on year gains in July, increases continue to vary widely among housing markets. Greater Vancouver with growth of 32.6% and the Fraser Valley up 37.6% recorded the largest year on year gains by a wide margin, followed by Greater Toronto at 16.7%, Victoria 17.5% and Vancouver Island 11.6%. By contrast, prices were down 4.2% in Calgary and by 1.5% in Calgary.

Home prices rose modestly in Regina by 2.7% year on year, in Greater Montreal by 1.8%, and in Ottawa by 1.1%. Greater Moncton recorded its largest year on year home price increase of 8.4% among an unbroken string of gains posted every month over the past year.

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 July 2016 was $480,743, up 9.9% year on year.

If these two housing markets are excluded from calculations, the average price is a more modest $365,033 and the gain is trimmed to 7% year on year.