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Posthaste: Average Canadian home prices have shot up $100,000 in 6 months — but don’t expect a market crash anytime soon

Ontario cottage country has seen the biggest jump in prices

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Average Canadian home prices have surged $100,000 since August — the sharpest surge on record.

A new report by the Royal Bank of Canada notes that average home prices in Vancouver jumped a record $143,000 in six months, while Toronto homes have risen $139,000.

“Yet it was markets in the periphery that led the way. Single-family home prices soared $147,000 in Barrie and $145,000 in the Fraser Valley since August. Hamilton-Burlington (up $137,000), Kitchener-Waterloo (up $114,000) and London-St. Thomas (up $104,000) weren’t far behind” RBC economist Robert Hogue wrote in a note Monday.

“Single-detached homes also got a lot more expensive in other B.C. markets, virtually all of southern Ontario, and parts of Quebec and the Atlantic Provinces.”

Latest data from the Canadian Real Estate Association for February shows national home sales jumped 6.6 per cent, compared to January. CREA’s home price index rose 3.3 per cent month-on-month in February — a record-setting rise.

CREA’s non-seasonally adjusted home price was up 17.3 per cent on a year-on-year basis in February — its biggest gain since April 2017 and close to the highest on record.

Lakelands region in Ontario’s cottage country, Tillonsburg District and Woodstock-Ingersoll, saw the biggest year-on-year gains across the country, rising 35 per cent.

The rapid surge in home prices have brought in even more speculators and also triggering the so-called Fear Of Missing Out (FOMO) instinct among buyers who were eager to enter the fray before prices run away further from them.

“A recent uptick in longer-term interest rates might also be dialing up the eagerness to act with some seeing the increase as a turning point for interest rates,” Hogue said. “In short, self-reinforcing price dynamics have taken hold in many parts of Canada, and are poised to keep things boiling in the near term.”

But there is little chance of speculators getting their comeuppance any time soon, with markets crashing and those sitting on the sidelines swooping in to pick up bargains.

Hogue expects a soft landing for home prices, as long-term interest rates eventually rise, and prices modestly decline by late 2022.

The supply side is also fuelling the market, with inventory levels at 1.8 months of sales, the lowest ever for February. Canadian home starts also stood at 246,000 in February, compared to 284,000 in January. While home starts remain at historically high levels, they are clearly not enough to calm markets.

Ksenia Bushmeneva, an economist at TD Bank Group, says that historically tight supply of houses on the market will continue to push prices higher in the near-term.

“However, home price growth is expected to moderate in the second half of this year, as prospective sellers become more comfortable listing amid accelerating vaccination pace and buyers shift their attention to more affordable options,” the economist noted in a report published Monday.

Daren King, economist at National Bank of Canada, expects some government regulations coming in to cool the sizzling market.

“With such a strong and widespread level of activity in the real estate market, we do not rule out the possibility that the government will consider macro-prudential measures in the coming months to cool the market,” King said.

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SPENT: Sean and Lucy moved to Toronto from Ireland less than three years ago and already, they’re earning just over $10,000 after tax in an average month.

Victor Ferreira tracks their finances and finds that for a couple that earns as much as they do, they’ve saved little in comparison. Outside of the $83,542 Sean has in vested and unvested company stock, they have little more than $60,000 between them. Both of them realize that has to change, especially if they want to be able to accomplish their long-term goals of either buying a home in Toronto after they marry next October or moving back to Ireland. How can they save more and splurge less? Read on here. Illustration Brice Hall

 

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  • U.S. Federal Open Market Committee meeting begins
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  • Seamus O’Regan, Canada’s minister of natural resources, to attend the virtual Berlin Energy Transition Dialogue, where he will enter into an energy partnership with Peter Altmaier, Germany’s minister of economic affairs and energy
  • Surrey Board of Trade hosts Irish Consul General Frank Flood and BC Minister of Energy Bruce Ralston as they focus on Canada-Ireland business opportunities utilizing the Canadian European Trade Agreement
  • Thomson Reuters hosts its 2021 investor day virtually at 8:30 a.m. ET
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The Bank of Canada sees the potential for a pleasant surprise from savings-fuelled household spending, but also that monetary stimulus will continue to be required for some time as the economy gradually recovers from the COVID-19 pandemic and is reshaped somewhat in its wake, writes Geoff Zochodone.

Bank of Canada Deputy Governor Lawrence Schembri on Thursday said that while many people have lost their jobs and taken hits to their finances during the pandemic, “forced and precautionary” savings have added up to an estimated $180 billion or so. Read the full story here.

 

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One of the first things the CRA will do with your return is run a sales or revenue comparison. The agency will compare the sales reported on your corporate or personal income tax return to what was reported on Line 101 of your HST return from the same period.

If they notice a difference in the amounts, it raises a flag for the CRA that maybe sales have been under-reported for either your income tax or HST.

They’ll also take a closer look at your HST by comparing what you owe (13 per cent of your reported sales) and how much was actually collected. If there’s a discrepancy, the CRA will ask you to clarify it.

Our content partner MoneyWise identifies ten red flags that could lead to a CRA audit.

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Today’s Posthaste was written by Yadullah Hussain (@YAD-FPEnergy), with files from The Canadian Press, Thomson Reuters and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com, or hit reply to send us a note.

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