Briefing highlights
- A more disturbing view of Toronto home prices
- Bayer strikes deal for Monsanto
- Video: Use of social media in the office
A different view
No one can forecast an end to the surge in Toronto home prices, but Paul Ashworth thinks it’s not that far off.
Mr. Ashworth, the chief North American economist at Capital Economics, believes that the annual pace of price gains in Toronto will hold at about 14 per cent through the rest of the year, based on the ratio of sales to new listings.
As for what might happen after that amid still-low interest rates, he looked to the Vancouver market, which showed signs of cooling even before the new 15-per-cent tax on foreign buyers of city properties, for an answer.
“The truth is that, for all the talk of so-called triggers, when they get that big, bubbles often end up collapsing under their own weight,” Mr. Ashworth said.
“Vancouver housing is another illustration of that with no obvious trigger, just as the original stock market crash in 1929 had no obvious trigger and nor did the bursting of the dotcom bubble in 2000,” he added in a report.
“The Toronto housing market is running a little behind Vancouver, but we suspect it won’t be long before it peaks, too. The problem then is that, just as expectations of rapidly rising prices and capital gains become self-fulfilling in the bubble stage, expectations of falling prices and capital losses become self-fulfilling on the way down, too.”
We saw more evidence of the stunning gains in the just-released Teranet-National Bank home price index, which showed Vancouver surging in August at an annual rate of 25.8 per cent, the fastest pace on record, with Toronto up 14.6 per cent.
Surrounding areas like Hamilton and Vancouver also did well.
What it all means, the group said, is that prices in Toronto have more than doubled since mid-2005, and that given the declining number of listings, conditions are the “tightest” in at least 14 years.
Vancouver’s another matter, as its monthly price increase was below 2 per cent for the first time in several months.
“Market conditions, although still tight, have eased in that city with the decrease in home sales since their peak last February,” said National Bank’s Marc Pinsonneault.
“That sets the stage for a moderate price correction in Vancouver.”
On Thursday, the Canadian Real Estate Association releases its monthly look at sales and prices, and we already know from local reports that Toronto sales surged while Vancouver saw a hefty drop.
Still, BMO Nesbitt Burns senior economist Benjamin Reitzes expects that report to show national sales rose 6 per cent from a year earlier, with average prices up 8 per cent.
The MLS home price index, which is seen as a better measure, is expected to show a 15-per-cent annual gain.
Mr. Reitzes, too, had a warning about the Toronto market, noting that the benchmark price surged almost 20 per cent last month.
And governments are likely to act to cool things down should that pace continue.
“That pace of persistent price gains is not healthy and breeds excess and speculative activity,” Mr. Reitzes said.
“Another month or two of acceleration and we’d stress the need for policy action.”
Bayer strikes Monsanto deal
Bayer has won its long quest for Monsanto, unveiling a $66-billion (U.S.) takeover after a sweeter offer worth $128 a share.
Bayer is funding the all-cash deal through both debt and equity.
“This transaction brings together two different, but highly complementary businesses,” the companies said in a statement, citing the challenges of the agriculture industry.