Posthaste: Toronto inches closer to overtaking Vancouver as Canada’s most expensive housing market – Financial Post

But it’s not a done deal, TD says

The average home price in Toronto in December is only 4 per cent below the average in Vancouver, the smallest gap since 1991.
The average home price in Toronto in December is only 4 per cent below the average in Vancouver, the smallest gap since 1991. Photo by Brent Lewin/Bloomberg
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Is Toronto about to become Canada’s most expensive housing market, knocking Vancouver from its throne? The crown is within reach, new research from TD Economics showed this week.

The average home price in Toronto in December is only 4 per cent below the average in Vancouver, the smallest gap since 1991, TD said.

That comes after a years-long trend of accelerating house price gains in Canada’s biggest city, outpacing those in Vancouver. More narrowing could be on the way, at least for the short term, TD economist Rishi Sondhi wrote in a note .

To understand why Toronto prices are catching up to those in Vancouver, look to how government restrictions and housing supply have affected both markets.

Policies implemented in Vancouver have played a big role in dampening home price gains compared to Toronto, TD said. For example, a 15 per cent foreign homebuyer tax introduced in 2016 helped put the brakes on price gains in Vancouver. More restrictions came in 2018, such as a higher land transfer tax, that further affected prices.

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Such policies also targeted the luxury market, shifting sales to less expensive homes. That, too, played a role in the price gap between the two markets, TD said, as more people snapped up expensive homes in Toronto, moving the average home price higher.

Indeed, prices in Toronto have grown 40 per cent since 2018, TD said. That compares to a 13 per cent gain in Vancouver.

Fewer listings in Toronto versus Vancouver have also fuelled price increases.

Between 2019 and 2021, Vancouver saw a 16 per cent increase in new listings, compared to only 6 per cent in Toronto. Meanwhile, high prices in Toronto appear to be making supply constraints worse, as would-be sellers sit tight over fears they won’t be able to find another home to buy.

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To add to the pressure on supply, fewer new homes are getting built in Toronto. Vancouver, meanwhile, has seen a slight increase.

TD expects the price gap to continue to shrink between the two markets in the next three months. But that doesn’t mean Toronto will overtake Vancouver to become Canada’s most expensive housing market.

For one, housing affordability concerns in both regions will likely keep the price gap from narrowing too much more. Both markets will see a rise in condo sales, TD said, that will weigh on the average home price and keep the markets in step with one another.

Rising interest rates are also likely to dampen sales in both cities, loosening supply constraints and keeping home price gains more muted.

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And there’s another possible way higher interest rates could affect home prices, TD said: by killing investor appetite.

The bank expects investors will dial down housing purchases as interest rates rise, resulting in less pressure on prices in Toronto, where investors comprised 24 per cent of home sales, compared to 20 per cent in Vancouver, during the second quarter of 2021.

“Investor activity remains a wildcard, which could swing the pendulum in the Greater Vancouver Area’s favour,” Sondhi said in the note.

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  • Bank of Canada releases its interest rate decision and Monetary Policy Report at 10:00 a.m, with news conference at 11:00 a.m.
  • U.S. Federal Reserve releases interest rate decision at 2:00 p.m, with news conference at 2:30 p.m.
  • Francis Drouin, member of Parliament for Glengarry-Prescott-Russell, announces a federal investment to improve high-speed internet access in rural regions of Ontario
  • Canada’s procurement ombudsman will host the Diversifying the Federal Supply Chain Virtual Summit
  • Wealthsimple CEO Michael Katchen appears at Canadian Club
  • Today’s Data: Canadian wholesale trade (December early indicator), U.S. new home sales
  • Earnings: Tesla Inc., Boeing Co., Intel Corp., AT&T Inc., Kimberly-Clark Corp., Abbot Laboratories, Celestica Inc., Whirlpool Corp.

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Oil is headed for $$100 a barrel, bulls say, but it doesn’t need to get there yet for companies, shareholders and governments to benefit.

With WTI prices above US$80, we’ve reached a milestone, writes Peter Tertzakian . Every $10-a-barrel increase is another billion dollars a day changing hands — going mostly into the pockets of resource owners, operators, and their investors. And Canada stands to benefit big-time.

Canada’s oil and gas industry generated an estimated record $158 billion of revenue in 2021 amid higher commodity prices. Previously, the high-water mark was $149 billion in 2008. If the price of WTI oil averages a base case of US$73-a-barrel this year, the annual Canadian sales bar could climb to $173 billion.

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But this isn’t a replay of the last oil bull run, nor high oil price days of the post-financial-crisis period. This time things are different, Tertzakian says. Read his column to to get his take .

oil and gas revenues

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Legendary investor Jeremy Grantham, who’s known for calling out market bubbles, says the historic crash he’s been predicting is finally underway. He also thinks it will be difficult for the Fed to prevent a market collapse of roughly 40 per cent from current levels. Grantham, who predicted the dot-com collapse and the 2008 meltdown of the real estate market, is also in charge of about US$60 billion as the investment chief at asset management firm Grantham, Mayo, & Otterloo.

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Our content partner MoneyWise points out a few safe haven stocks in the firm’s portfolio to take a look at, before Grantham’s predictions have a chance to come true.

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Today’s Posthaste was written by Victoria Wells (@vwells80), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at  posthaste@postmedia.com , or hit reply to send us a note.

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