Canadian home sales rose to a record in December just before tougher mortgage rules took effect, helping make 2017 the second strongest market ever.
Transactions climbed 4.5% from November to 45,976, the Canadian Real Estate Association reported from Ottawa earlier this week, and are up 9% over the past two months. This represented the biggest two-month gain since 2009.
Meanwhile, the national benchmark price index was little changed on the month and was up 9.1% from 12 months earlier.
Home buyers were racing to get ahead of more stringent mortgage eligibility rules that took effect on January 1, potentially distorting year-end sales figures. Still, 2017 was the second strongest year for sales on record, and included strong gains in prices, even with the efforts to slow down the market.
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“National home sales in December were likely boosted by seasonal adjustment factors and a potential pull-forward of demand before new mortgage regulations came into effect this year,” CREA chief economist Gregory Klump said, as quoted by Bloomberg. “It will be interesting to see if monthly sales activity continues to rise despite tighter mortgage regulations that took effect on January 1st.”
It was a tumultuous year for realtors, starting with sharp price gains in the Toronto market that prompted regulators to impose new measures, including taxes on foreign buyers, in order to rein it in. The measures helped to cool Toronto prices, but nationally the market remains robust. Sales in December rose in about 60% of markets led by Toronto, Calgary, and the Vancouver area.
The December surge brought the streak of gains to 5 months. Sales for all of 2017 fell by 4% from 2016’s record. The Canadian Real Estate Association projected that sales will have another down year in 2018 as demand gets weighed down by rising mortgage rates and a new federal rule requiring borrowers show they can afford payments that are much higher than current market rates.
While national home prices have come down since peaking in May, 2017 was still a strong year. The 9.1% year-over-year price gain in December is the second largest appreciation for that month in the past decade.
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