Vancouver, Toronto markets continue to drive Canadian real estate industry

Bank of Montreal economist Doug Porter says Toronto is the midst of a housing bubble, comparing the market to “frothy” levels not seen since the 1980s, while the Alberta market is stabilizing.

“There’s nothing tentative about the red-hot housing market in Toronto and neighbouring areas,” said Porter, in a note out Monday, referring to the 22 per cent price appreciation of existing homes. “An apparent influx of foreign wealth, coupled with record-high demand and a shortage of detached properties, are driving the frothiest price increases since the late 1980s. Prices are even accelerating in segments and areas without shortages.”

He notes firmer price gains are being recorded in Montreal and Ottawa after a lengthy period of stagnation.

Porter predicts “some further softening in Vancouver’s prices” after 33 per cent year over year gains in prices prior to the province imposing a 15 per cent property land transfer tax on foreign buyers in the city. “Many of whom have turned tail and are looking elsewhere,” said the economist.

The economist’s thoughts came out on the same day the Canadian Real Estate Association released its monthly numbers for January, showing sales across the country up 1.9 per cent from a year ago but down 1.3 per cent from December on a seasonally adjusted basis.

Home sales nationally are at the second lowest monthly level since the fall of 2015 and only slightly above levels recorded last November when recently tightened mortgage regulations came into effect. “Sales activity was down from the previous month in about half of

Canadian homebuyers face some challenges this year, including new mortgage rules ...

all local markets, led by three of Canada’s largest urban centres: the GTA, Greater Vancouver and Montreal,” said the Ottawa-based group which represents about 100 boards across the country.

The actual national average price for homes sold in January was $470,253, up only 0.2 per cent from a year ago and carried by activity in Toronto and Vancouver.

Without Greater Toronto and Greater Vancouver, the average price of a home in the country is reduced by almost $120,000 to $351,998.