Garth Turner calls it the “Vancouverization of Toronto,” and there might not be a more apt term. It’s exactly what chief economist at Gluskin Sheff, David Rosenberg, looked at when he wrote his report last week titled “Tale of Two Cities.” In the report Rosenberg compared the Toronto mortgage and housing market to that of Vancouver’s; and who’s emerging as the winner really depends on your perspective – and if you’re buying or selling your home.
The report showed that sales of existing homes were down for the month of May in Vancouver by 15.5 per cent. That seems like a lot, and it is. It’s the lowest the city has seen since May 2001 for that month. But while sales were down, the amount of backlogged inventory went up 16.8 per cent; and listings increased by 14.4 per cent from one year ago. All of this means that in Vancouver anyway, the scales are finally tipping in the buyer’s direction rather than the seller’s.
In the report Rosenberg stated, “The supply-demand balance showed the increasing emergence of a buyer’s market taking hold, with average selling prices for single-family homes deflating year-on-year.”
But that is not so in the GTA. While prices fell in Vancouver during the month of May, those in Toronto soared – by 11 per cent in fact. And while Rosenberg said that the condo market here is finally cooling, the average resale price of a home in May was $516,787 – an increase of 6.5 per cent when compared with last May, says Rosenberg.
And while it may be good news for buyers in Vancouver, and music to sellers’ ears in Toronto, all of this still means that we have reason to worry – especially the inflation of prices that’s happening in Toronto right now. The Bank of Canada has reiterated their warnings that Canadians are taking on too much consumer and second mortgage debt, especially at a time when income levels have remained steady, if not dropped.
Rosenberg says that in order for the BoC to strike the balance it’s seeking between short-term rates and its own target for inflation, it would need to raise the rate by 100 basis points.
“That wouldn’t cause a recession,” Rosenberg said. “But it sure would be painful for many households.” Rosenberg said that raising the rate by that many basis points would cause more people to default on their loans, and it would drastically reduce spending growth – the very thing that keeps our economy churning.