toronto-home Photo: Robert Jack 啸风 Will

Looming mortgage rule changes and better than expected performances from the British Columbia and Ontario housing markets prompted the Canadian Real Estate Association to upwardly revise its resale housing forecast earlier this week.

The association now predicts 504,000 units will change hands through MLS systems across Canada this year, which would be the second best year on record behind 2007, when transactions equalled 521,804 residential units.

Following the release of the upwardly revised forecast, some of Canada’s biggest banks shared their views on CREA’s numbers and commentary.

Effects of new mortgage rules could spur sales in the near-term, cool activity in 2016

TD Bank, Scotiabank and BMO agree impending rule changes for government-insured loans could boost home sales for the remainder of the year. With the interest on the portion between $500,000 and $1 million of government-insured mortgages set to rise from five per cent to 10 per cent on February 15th, 2016, some consumers may look to avoid paying more by buying now, the banks say.

“The new changes may create some volatility in the market over the near-term,” writes Diana Petramala, a TD economist. “But, past changes to insured mortgage qualifying rules have proven to be temporary in nature, with the market adjusting within a four to six quarter period,” she adds.

Over the next four quarters, Scotiabank economist Adrienne Warren expects the mortgage rule changes “will likely have a modest dampening impact on sales in 2016, particularly for first-time homebuyers in high-priced markets.”

However, Warren doesn’t think the larger down payment will have a major impact on home sales in Toronto and Vancouver, despite the fact that those were the markets the rule changes were geared towards cooling.

“The ability to slow the rapid pace of price increases in the Vancouver and Toronto markets in the near-term may be more limited,” she writes. The reason? She lists a few: “favourable demographic fundamentals, strong job growth, supply constraints, and foreign buying supporting demand.”

A mild fall heated the housing market

In his response to CREA’s release, BMO economist Douglas Porter noted one non-economic factor that he says partly explains the hot streaks in Ontario and British Columbia’s housing markets.

“No doubt, incredibly mild fall weather added to the momentum,” writes Porter, though he acknowledges that “sales activity has been surprisingly resilient for most of 2015.”

Industry experts have looked into weather’s impact on real estate before. A 2011 Royal Lepage survey suggests weather can have a short-term effect on housing market activity.

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