12 February 2018

A new report from Canada Mortgage and Housing Corporation (CMHC) shows that Toronto is the only housing market in the country defying economic fundamentals. Vancouver shows much higher prices, but it still follows the rules in general.

The CMHC’s study was commissioned by the federal government in June 2016 as a part of its attempts to reduce the lack of high-quality housing market data and create a new national real estate strategy.

The results show that population growth, incomes and borrowing costs accounted for only less than half of the 40% increase in Toronto housing prices in 2010-2016.  CMHC says the Toronto market is quite odd, and there are more reasons for home prices growth than only a strong demand. CMHC names restrained supply, speculation and investment as well.

It also shares the central bank’s opinion that interest rates are not the best way to control a potential market bubble. Toronto is the only problematic market, so this issue should be solved at the municipal level.

As the interest rates are rising these days and home prices in Toronto seem to be stabilizing, any new change on a federal level could be unnecessary.