US & Canada
According to the Canadian Real Estate Association’s monthly report, home sales across Canada increased by 4.5% in December as compared to the sales figures in the previous month. And, the reason for the spike in sales appears to be stricter mortgage regulations kicking in from January 1, 2018. The number of homes on the market also jumped up by 3.3% between November and December.
CREA said the bounce likely stemmed from heightened demand for homes ahead of the Office of the Superintendent of Financial Institutions' tighter stress tests for those with uninsured mortgages that came into effect on Jan. 1.
The rules call for would-be homebuyers who have more than 20% down payment to show they can still service their uninsured mortgage at a qualifying rate of the greater of the contractual mortgage rate plus two percentage points or the five-year benchmark rate published by the Bank of Canada.
"The new OFSI measures and a shift to a rising-state environment should prevent speculative froth from building again, and contain price growth to a reasonable pace for the remainder of the cycle," BMO Capital Markets senior economist Robert Kavcic wrote in a note.
The real estate association has moderated its sales projection for 2018 as a result of the anticipated impact of new stress tests, forecasting a 5.3% drop in national sales to 486,600 units this year, shaving about 8,500 units from its previous estimate.
"It will be interesting to see if the monthly sales activity continues to rise despite tighter mortgage regulations," Gregory Klump, CREA's chief economist, said in the report.
In the concluding month of 2017, the average national home price reached just over $496,500, up 5.7% from one year earlier. December home sales were up 4.1% from the previous December, signalling that the country is "fully recovering from the slump last summer," said CREA.
Various real estate experts have said that a set of policies introduced by the Ontario government in April produced the desired market slowdown in Toronto during the second and third quarters following a hot first quarter.
Sixty per cent of all local markets also saw a surge in activity in December with the Greater Toronto Area, Edmonton, Calgary, the Fraser Valley, Vancouver Island, Hamilton-Burlington and Winnipeg leading the country.