Photo: James Bombales
A major index tracking Toronto home prices climbed for the second month in December, in what one economist is calling the end of the effects of the Fair Housing Plan.
The Teranet-National Bank Composite National House Price Index rose 0.2 per cent in December, while Toronto’s unsmoothed index rose for a second month in a row.
The index tracks prices for homes that have been sold at least twice in 11 Canadians cities, and smooths the data between the markets. The unsmoothed index presents a clearer picture of each market’s month-to-month fluctuations.
According to National Bank economist Marc Pinsonneault, the second month of rising prices shows that the effects of Ontario’s Fair Housing Plan, and its foreign buyer tax, have worn off.
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It’s a sentiment that has been echoed by plenty of industry experts. “Similar to the Greater Vancouver experience, the impact of the Ontario Fair Housing Plan and particularly the foreign buyer tax may be starting to wane,” Toronto Real Estate Board president Tim Syrianos wrote in a statement.
“Toronto prices…will probably follow the pattern observed in Vancouver,” Scotiabank VP and head of capital markets economics Derek Holt wrote in his own note.
The rise can also be partially attributed to buyers looking to get into the market before the new mortgage rules came into effect on January 1.
The rules consist of a new stress test for uninsured mortgage borrowers, and come at a time when the Bank of Canada is widely expected to rise the overnight rate several times over the course of 2018.
Pinsoneault is quick to note that any boost from those looking to avoid a mortgage stress test won’t last long. “This improvement is likely to prove temporary, as it might have resulted from buyers rushing to avoid the new bylaws on qualification for an uninsured mortgage,” he writes.
Those same mortgage rules could push Toronto sales lower in 2018. “A resumption of the downward price trend early this year cannot be excluded,” he writes.
As for what 2018 has in store for other markets, Pinsoneault says that conditions are becoming increasingly tight in Vancouver, pushing prices higher, while Calgary and Montreal will likely see prices dip lower.