National home sales rose 4.5 per cent in December from the month before as buyers scrambled to nab homes ahead of stricter mortgage regulations coming into effect, the Canadian Real Estate Association said Monday.
The organization's monthly report said the number of homes on the market also jumped up by 3.3 per cent 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 require would-be homebuyers who have more than 20 per cent down payment to prove 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 cut its sales forecast for 2018 as a result of the anticipated impact of new stress tests, forecasting a 5.3 per cent 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 final month of 2017, the average national home price reached just over $496,500, up 5.7 per cent from one year earlier. December home sales were up 4.1 per cent 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.
That spike came as no surprise to Toronto-based realtor David Fleming.
While agents typically avoid keeping listings up over the holidays, he saw many bucking their usual habit this year by leaving homes on the market because sales were so strong.
Of the three listings he let sit, one sold on Dec. 31 and another on Jan. 2.
"There are definitely people who thought they had to close a deal before Jan. 1. and the numbers are really showing that," Fleming said.
"I think it will take a couple months for buyers to wrap their heads around the new rules and for the country to see the affect."
In the interim, he believes the market is balanced, but edging towards being in a buyers' favour.
CREA's report noted the balance too, citing that the country's 4.5 months of inventory is inching "steadily lower" in tandem with the monthly rise in sales that began last summer.