OPINION: The strength of 12-month home price growth at the national level is mostly explained by four markets: Toronto, Hamilton, Victoria and Vancouver (top chart). Toronto has garnered media attention in light of the house price surge. While large price gains in that city were isolated earlier to single family homes, that’s not the case anymore ─ condo prices are up a stunning 17% (middle chart). Shut out of the unaffordable single family house market, many buyers are now heading towards apartments, boosting the latter’s prices as a result. Regardless, Toronto’s almost 25% year-on-year house price gains cannot be fully explained by increases in employment and household formation. Outside of Toronto, home prices are also rising in several cities. Indeed, indexes based on the same Teranet-National Bank methodology were calculated for 15 cities not currently covered by the Composite. We found double-digit home price inflation in 10 of them. Together with the metropolitan areas covered by the Composite, it means that 58% of the 26 markets surveyed experienced double-digit home price inflation. This record proportion is very similar to that observed in the United States in 2005 at the peak of the market (bottom chart). That may get government to impose additional measures to put the housing market on a more sustainable footing. The Bank of Canada could also help address the problem by ditching its dovish rhetoric and signal tighter monetary policy ahead to reflect improving economic data but also mounting risks to financial stability.

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