Photo: James Bombales

Canadian housing activity took a steep plunge at the beginning of 2018, before leveling out over the past few months. But according to one bank, the story hasn’t been the same for every province.

“New stress tests for borrowers and rising interest rates weighed on Canada’s housing market in the first part of 2018,” writes the RBC Economics team, in a recent note. “While the correction proved deeper and lasted longer than we had anticipated, we believe it has largely run its course with sales rising in the three months to July.”

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According to the team, the national drop in sales masked the divergence in activity across different regions — especially Quebec.

“Regions in BC and Ontario [are experiencing] more substantive declines while Quebec will likely see sales increase on average this year,” they write.

Earlier this year, Scotiabank economists Marc Desormeaux and Mary Webb noted that Quebec had managed to largely avoid the negative effects of the stress test.

“The affordability of Montreal’s housing relative to Southern BC’s largest cities and Ontario’s Greater Golden Horseshoe bestows a significant competitive advantage,” they wrote. “Balanced home ownership and rental markets point to relatively modest near-term home price appreciation and rent increases for Montreal, reinforcing its housing affordability edge.”

As for the rest of 2018, the RBC team predicts that the national recovery in activity will continue, which should bring the annual decline in sales to 11.5 per cent.

They also note that while prices have started to rise in some markets, it will largely remain at a moderate pace for the foreseeable future.

“Prices in Vancouver and Montreal are up while, after falling, prices in Toronto have levelled off,” they write. “Our forecast looks for price gains to average just 1.8 per cent this year with little change expected in 2019, a marked slowdown from the close to 10 per cent gains recorded in 2016 and 2017.”

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