Photo: James Bombales

After reliably propping up the Canadian economy for years, home sales took a drastic dip in January, taking a chunk of the country’s GDP with them.

But now that the housing market seems to finally be adjusting to the cooling effects of new mortgage rules earlier this year, that could be about to change.

“Releases this week solidify our view that macroeconomic fundamentals remain strong in Canada,” writes the TD Economics team, in a recent note. “Our 2018 and 2019 GDP forecasts were modestly revised upward to allow for…some slight additional upside in housing market momentum.”

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That momentum looked like a 0.9 month-over-month jump in national home sales in August, a trend that TD predicts will continue in the coming months.

“Especially notable were gains in some of British Columbia’s markets, the hardest-hit by a combination of federal and provincial regulations,” writes the team. “Once again, the release adds more evidence that housing markets are recovering [from spring 2017’s slump], and are on track to add some modest upside to growth.”

But not everyone is as optimistic about where the market is headed. In its latest data release, the Canadian Real Estate Association cautioned that rising interest rates could keep activity relatively cool for the foreseeable future.

“Economic and demographic fundamentals remain supportive for housing demand in many parts of the country; however, policy headwinds have impacted homebuyer sentiment and access to mortgage financing in many housing markets,” reads the release. “Further expected interest rate increases…are expected to continue to keep home sales activity in check over the rest of the year and into 2019.”

National sales could decline by 9.8 per cent in 2018, according to the CREA release, while the national average price is projected to fall to $494,900, down 2.8 per cent year-over-year.

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