Sarah Niedoba from Buzzbuzzhome

A new mortgage stress test that came into effect on January 1 sent home sales across the country plummeting. But now that the first quarter of 2018 is behind us, is there relief in sight for the Canadian housing market?

Some signs point to yes — a flattening of prices and a small uptick in sales could mean that the worst effects of the new mortgage rules are behind the market.

To take a closer look at the issue, BuzzBuzzNews has rounded up the latest industry commentary on where the market is headed next.

The GTA could be leveling out

While GTA home sales numbers are still not what they could be — they only increased by 2.1 per cent month-over-month in March — RBC senior economist Robert Hogue says that the increase is a sign that the market is on its way to balancing out.

“On the surface, [home sale numbers] continued to point to significant weakness in activity on a year-over-year basis in [the GTA],” he writes. “[However,] in the GTA, the sharp year-over-year drop in home resales in March was only modestly more pronounced than the 35 per cent decline recorded in February.”

Hogue does caution that, even with a slight month-over-month uptick in sales, it’s likely still too soon to know to what extent the market will recover from the effects of the stress test in coming months.

“It will take a little longer to ascertain how much of the impact is temporary and how much is permanent,” writes Hogue.

Prices are flattening

Prices are also showing signs of balancing out. The Teranet-National Bank Composite National Home Price Index was flat in March, following a 1.9 per cent decline in February.

According to National Bank senior economist Marc Pinsonneault, the Toronto and Vancouver markets disportionately affect the index, and the flat reading in March reflects the fact that both have begun to level out.

“The decline [in March] was the most obvious in Toronto [which has dropped 7.3 per cent since July],” he writes. “This drop was likely triggered by Ontario’s implementation of the 15 per cent [foreign buyer tax] followed by stricter rules for qualification for a mortgage and a rise in mortgage rates.”

Pinsonneault writes that these changes have balanced out the Toronto market, while the Vancouver market is likely to follow suit, after an expansion of its foreign buyer tax was announced last month. The result? National home prices will remain relatively even in the coming months.

“With the two most important Canadian markets now in balanced territory or nearing it, a soft landing is the most likely outcome for the Canadian residential market,” he writes.

Sales are inching upwards

After two consecutive sales drops in January and February, home sales inched up 1.3 per cent in March.

That number was supported by strong activity in markets like Montreal and Ottawa, where sales were up 5.1 per cent and 22.1 per cent, respectively. This offset a 8.6 per cent drop in Vancouver home sales, and a small 2.1 per cent increase in the GTA.

“Canadian housing markets are likely to remain under-pressure from the recent [new mortgage rules], higher mortgage rates, and in some cases provincial regulation,” writes TD senior economist Michael Dolega, in a recent note. “However, lower-priced markets where affordability is good should generally outperform in the current environment.”