Home sales forecast cut due to incoming tighter mortgage rules

OTTAWA — The Canadian Real Estate Association has cut its home sales forecast for next year due to the impact of tighter mortgage regulations that come into effect New Year’s Day, which are expected to rein in spending for some buyers.

The association said in an updated projection Thursday the banking regulator’s revised mortgage underwriting guidelines, which include a stress test for uninsured mortgages, will reduce sales activity across the country, particularly in and around Toronto and Vancouver.

The association now forecasts a 5.3 per cent drop in national sales to 486,600 units next year.

That new estimate shaves about 8,500 sales from its previous 2018 forecast.

The national home price is expected to slip by 1.4 per cent in 2018 to $503,100.

“With some homebuyers likely advancing their purchase decision before the new rules come into effect next year, the ‘pull-forward’ of these sales may come at the expense of sales in the first half of 2018,” the association said in a statement.

“Meanwhile, other potential homebuyers are anticipated to stay on the sidelines as they save up a larger down payment before purchasing and contributing to a modest improvement in sales activity in the second half of 2018.”

In November, the number of homes sold through its Multiple Listing Service rose by 3.9 per cent compared with October, led by a 16 per cent sales spike in the Greater Toronto Area.

Sales were up 2.6 per cent from last November, marking the first year-over-year increase since March.

That helped send the national home price up 2.9 per cent, yearover-year, to $504,000.

The number of newly listed homes rose 3.5 per cent in November, which reflected a large increase in new supply across the GTA.