Photo: James Bombales

After four straight months of declines, a major index tracking Toronto home prices is starting to climb. November saw Toronto’s unsmoothed Teranet National Bank Index jump 0.5 per cent.

“After a string of four declines, Toronto’s unsmoothed index rose in November, pushing the unsmoothed composite index in positive territory,” writes National Bank economist Marc Pinsonneault in a recent note.

The index tracks prices for homes that have been sold at least twice in 11 Canadian cities, and smooths the data between the markets. The unsmoothed index presents a clearer picture of each market’s month-to-month fluctuations.

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So why is Toronto seeing a rise in prices after such a prolonged downturn? According to Pinsonneault, it may have to do with buyers looking to avoid new mortgage rules.

“November’s increase in the index might have been exacerbated by buyers who rushed to avoid the new bylaws on qualification for an uninsured mortgage,” he writes. “This view is supported by the increase in home sales from October to November in Toronto, bucking the usual seasonal trend.”

GTA home sales jumped to 7,374 home sales in November, up from October’s 6,379, according to the latest data from the Toronto Real Estate Board.

Industry players have speculated that the increase could be caused by those worried about a new national mortgage stress test. Starting January 1, the test will require all uninsured mortgage borrowers to qualify against the Bank of Canada’s five-year benchmark rate, or at their contract mortgage rate plus an additional 2 per cent.

That same test that is causing prices to spike now, will likely lead to a cooling in the new year.

“A resumption of the downward price trend early next year cannot be excluded,” writes Pinsoneault.

Other predictions for 2018? Increasingly tight conditions in Vancouver, where supply remains low while demand is high. The price index for condos in the city has increased by 19 per cent over the last 10 months.

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