BMO Senior Economist compares trends in the two markets, primarily focusing on prices
Josh Sherman
Livabl
The housing markets in Toronto and Vancouver are on very different paths, new commentary from an economist with one of Canada’s biggest banks highlights.
In a note to clients this week, BMO Senior Economist Robert Kavcic compares trends in the two markets, primarily focusing on prices.
First up was Toronto. Kavcic notes sales in June were up 10.4 percent annually, while the benchmark price climbed 3.6 percent. “Month- over-month, condo prices looked very strong, and remain the much tighter subset of the market,” writes Kavcic.
“All told, this is playing out largely as expected, with the market firming up after absorbing past policy changes, and with the help of meaningfully lower 5-year fixed mortgage rates,” he says.
It’s been a year and a half since policymakers introduced stress tests for uninsured mortgages that require borrowers to qualify for loans at a rate 2 percentage points higher than the lender is offering on contract.
Over this time, homebuyers are adjusting to new constraints from the test and opting for more affordable condo apartments, one expert recently suggested. And increased sales activity has removed excess supply from the market restoring balance. Meantime, five-year fixed mortgage rates have fallen to multi-year lows.
While Toronto looks like it’s benefitting from these developments, it’s a different story in Vancouver, where Kavcic notes June sales plunged 14.4 percent on a year-over-year basis, and the benchmark home price nosedived by 9.6 percent compared to 12 months ago.
“That is now approaching declines seen at the depth of the financial crisis (13.3% at its worst),” says Kavcic, referring to the 2007–2008 global economic collapse.
“And, with the market balance still very soggy, that looks to continue for some time yet. In fact, condo price declines only look like they got worse, not better, in June,” he adds.
© 2019 BuzzBuzzHome Corp.
