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business briefing

Briefing highlights

  • Toronto housing market surgest
  • Global markets mixed
  • Bank of Canada expected to hold
  • Video: Use of social media in the office

Toronto housing surges

Toronto’s housing market is setting fresh records, with no “relief” in sight for the dwindling number of homes for sale.

Both sales and prices surged in August, according to the Toronto Real Estate Board, as listings contracted at a fantastic pace.

The Toronto market has been on fire just as Vancouver, the other Canadian city that is the focus of bubble fears, begins to cool.

Vancouver sales fell sharply in August, the first month of a new 15-per-cent tax on foreign buyers of area properties, and economists believe such purchasers could shift to Toronto at some point, though it’s still too early to tell.

Sales in the Toronto area climbed 23.5 per cent last month from a year earlier to an August record 9,813, though dipped from July’s showing. There were two extra working days last month compared to August, 2015, however, and the real gain was more like 13 per cent when you take that into account, the realtors group said.

The average price in Toronto climbed 17.7 per cent from a year ago, to $710,410, but that doesn’t really tell the story given the difference in types of homes and the regions involved.

The average price of a detached home in Toronto’s 416 area code rose 18.3 per cent to $1.21-million, while a similar house in the surrounding 905 region climbed 23.3 per cent to $905,610.

The MLS home price index, deemed a better measure, surged 17.2 per cent from a year earlier.

“The conditions underlying strong demand for ownership housing remained in place, including a relatively strong regional economy, growth in average earnings and low borrowing costs,” TREB president Larry Cerqua said in unveiling the numbers.

“Unfortunately, we did not see any relief on the listings front, with the number of new listings down compared to last year.”

Indeed, new listings slipped 1.2 per cent in August from a year earlier, while active listings plunged by 37.8 per cent.

As The Globe and Mail’s Brent Jang and Tamsin McMahon report, sales in Vancouver fell 26 per cent in August from a year ago.

Vancouver’s market was already cooling, so it’s hard to say how much of the sales decline was linked to the B.C. government’s new tax. But it’s expected to affect the Toronto market at some point.

“We think Toronto is mostly being driven by domestic players,” said Toronto-Dominion Bank economist Diana Petramala.

“We think there is still some pent-up demand in the market. However, we suspected that foreign interest may have already been shifting to Toronto over the first half of 2016, as foreigners appear to be looking for more affordable markets globally.”

BMO Nesbitt Burns chief economist Douglas Porter doesn’t believe the B.C. tax was a major factor in Toronto last month, though “it may have played a small role in further juicing an incredibly hot market.

He also warned that the Toronto price surge should “command attention,” warned BMO Nesbitt Burns chief economist Douglas Porter.

He noted that average prices over the past year have soared by more than $100,000 per house, with those for detached homes surging by more.

“Given that interest rates are essentially unchanged over the past year and that overall inflation in Toronto is running at least than 2 per cent, that is a massive move, which of course has further hammered affordability,” he added.

“Moreover, given the plunge in active listings (sales last month also matched active listings), there is little reason to expect prices to cool any time soon, especially with interest rates expected to remain at a low ebb for the foreseeable future.”

BoC holds firm

The Bank of Canada is still anticipating a “substantial rebound” in the second half of this year as the economy gets a lift from federal spending, rebuilding from the Alberta wildfires and recovering oil production, The Globe and Mail’s Barrie McKenna reports.

The central bank opted once again to keep its key overnight interest rate at 0.5 per cent, where it has sat for the past 14 months.

“The overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate,” the central bank said in a statement.

On the plus side, the bank pointed to recovering oil production and the increase in the Canada Child Benefit, brought in by the federal government.

Video: Use of social media in the office