CIBC issues strong warning on Toronto and the surrounding areas now being in a housing bubble
Latest data from the Canadian Real Estate Association (CREA) revealed that resale volume in the national housing market has declined by 1.3 per cent month-over-month in January, accompanying continuous price growth in the Toronto housing market—an unstable concoction that has escalated fears of the housing bubble being finally here.
Average home resale prices in Toronto have seen a significant 22.6 per cent year-over-year upward spike in January, pumping the national average by 15.0 per cent, Reuters reported.
BMO Capital Markets chief economist Doug Porter issued a strong warning after the Wednesday (February 15) release of the CREA data.
“Let's drop the pretense. The Toronto housing market - and the many cities surrounding it - are in a housing bubble,” Porter wrote in a research note.
“Toronto and any city that is remotely within commuting distance are overheating, and perhaps dangerously so. It's a very different story in most of the rest of the country, where conditions are generally calm and under control.”
The statement mirrored the latest edition of the Teranet-National Bank Composite House Price Index, which found that the consistently exceptional performance of the Toronto housing market has propelled the national home price average to new heights last month.
And despite dampened sales volume recently due to tighter federal mortgage rules, CREA noted that price growth might not slow down even this year due to supply scarcity in red-hot markets (including Toronto).
“Unless sales activity drops dramatically, the outlook for home prices remains strong in places that face a continuing supply shortage,” CREA chief economist Gregory Klump wrote in the February 15 report.
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