A Tale of Two Cities – As Vancouver Housing Softens, Can Toronto Be Far Behind?

The Globe & Mail reported last week.  Vancouver housing sales dropped 21% in July from June with prices dropping marginally by 1% for resale homes.  Presumably, new home sales followed suit.  Contrast this to Toronto where although July numbers are not out, as previously reported on this blog, nearly 24,000 new homes and condominiums were sold in the first 6 months, putting Toronto on track to its second best new housing year on record.   There are a lot of similarities between the 2 cities with significant high-rise activity driving the market, fuelled by major immigration to both cities as immigrants are choosing these 2 cities as the most favourite places to go in Canada.   The big difference between the 2 cities is that prices have jumped over 21% in Vancouver for resales vs. 2.6% for new low-rise housing and 8.3% for new high-rise housing in Toronto.  Though the affordability factor is becoming unmanageable in both cities, clearly Vancouver is right off the charts.   The real test will be this fall when a significant number of new high-rise projects will be launched in the GTA at record prices.  Currently, even in Mississauga, high-rise prices are in the mid $500 per square foot and in the GTA, south of the 401, $600-$800 per square foot is the norm.   Given the collapse of the stock markets over the past 2 weeks and current state of global and national economies, Mark Carney will be forced to maintain the low interest rates and perhaps even lower them.  This will probably stabilize the local housing market through the fall, barring further economic catastrophes.  Keep your eye on Vancouver, as both markets are driven by investors and if one goes, the other may not be far behind.  And if world stock markets go into a free fall and stall job and economic growth, liquidity and consumer confidence may become a significant factor in GTA's market, as it was in November 2008-August 2009.