Photo: James Bombales

It’s too soon to say for certain what the first few months of 2018 will bring for the Canadian housing market — but that isn’t stopping Canadian economists from making their best guesses.

Canadian home resales set a record high in December, with 551,700 units sold. That had economists scrambling to predict whether the trend would continue into the new year, or if industry watchers should brace for a cooling period.

Could the market be poised to keep growing?

“The fact that home resales set a new record high in December…made us pause,” writes RBC senior economist Robert Hogue in a recent note. “What if the market is taking flight again?”

Hogue ultimately abandons this idea in his note, writing that while sales momentum might be stronger than he had previously predicted there are still “several elements” which will ensure the Canadian housing market stays in “soft landing mode” in 2018.

“The more stringent qualifying rules for uninsured mortgages will raise the ownership bar significantly for many buyers,” he writes. “These changes may prompt some buyers to delay their buying decision. In the near term, we expect some payback for the rush to get deals done in November and December before the new rules took effect.”

Hogue also cites rising interest rates as another factor in a cooling market. The Bank of Canada raised the overnight rate to 1.25 per cent earlier this week.

“This will raise the ownership bar even higher at a time when affordability is already stretched in some of Canada’s major markets,” writes Hogue.

What do the fundamentals say?

Even if the market does cool in the first few months of 2018, some economists don’t think it will stay down for long.

According to Scotiabank’s economics team, the fundamentals are too strong for things to slow for an extended period of time. “Housing demand fundamentals, including low unemployment, strengthening wage gains, aging millennials and increased immigration remain supportive [of market growth],” they write.

The team points out that the market is still particularly tight in the Greater Vancouver and Toronto, while the rest of the country remains in balanced market territory.

“National average price growth is forecast to remain positive, albeit more subdued in the low single digits, with the majority of local market in balanced territory,” they write.

What are the markets to watch?

2018 might just be the year that the Quebec market takes off, according to TD economists Michael Dolega and Rishi Sondhi.

“Strong economic conditions have underpinned solid housing demand in Quebec, with tighter resale markets and accelerating prices resulting,” they write in a recent note.

The two economists single out Montréal’s strong performance in 2017 as the main driver of growth in the province — 44,448 sales, the highest number on record since 2007.

“Looking ahead to 2018, solid job growth should support higher sales and rising prices in Quebec, given the healthy affordability metrics,” write Dolega and Sondhi.

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