Photo: James Bombales

November saw Canadian home sales jump 3.9 per cent, in what experts are calling a pull-forward of activity, before new mortgage rules come into effect in the new year.

“Some of the gain may reflect some pull-forward of sales activity in an attempt to beat the implementation of the updated B20 guidelines in January 2018,” reads a recent note from TD senior economist Michael Dolega.

The updated guidelines, which come into effect on January 1, will require all uninsured mortgage borrowers to qualify against the Bank of Canada’s five-year benchmark rate, or at their contract rate plus an additional 2 per cent.

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“Note that the November gain was the second best monthly increase of the year, and could reflect some activity getting pulled forward ahead of the new [mortgage [rules],” writes BMO senior economist Robert Kavcic.

Those same guidelines are likely to cool the market in the new year, as fewer buyers are able to qualify for a mortgage. Still, Dolega notes that a healthy economy should mean that the effects aren’t too drastic.

TD is forecasting a 2017 annual GDP growth of 3.0 per cent, with an above-trend growth of 2.4 per cent in 2018.

“Overall, we anticipate a continuation of the soft-landing narrative that has so far characterized dynamics in Canada’s housing market,” writes Dolega. “Higher mortgages will be a significant headwind on Canadian housing activity in 2018. However, still-solid employment and income growth should cushion the blow.”

Kavcic writes that, while markets like Toronto still have strong supply-demand fundamentals that could push sales and prices higher, the new guidelines should cool the market in 2018.

“The adjustment in the Toronto market is ongoing, but strong underlying fundamentals should prove supportive next year once the remaining froth gets worked off,” he writes. “In all likelihood, the coming rules changes should keep the froth from returning.”

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