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Supply shortages in Toronto, Vancouver left house prices ‘nowhere to go but up’

Home construction in Toronto and Vancouver failed to keep pace with surging demand between 2010 and 2016, leaving prices with “nowhere to go but up,” according to a new report from Canada’s federal housing agency.

Home prices soared 40 per cent in Toronto over the period examined and 48 per cent in Vancouver.

While conventional economic factors such as population growth, migration to cities and low mortgage rates were important drivers behind those increases — accounting for 75 per cent of the price jump in Vancouver and 40 per cent of the rise in Toronto — a “weak supply response” to surging demand was also a crucial factor, the report found.

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“Large Canadian centres like Toronto and Vancouver are increasingly behaving like world-class cities,” said Aled ab Iowerth, deputy chief economist at the CMHC. “When you have weak supply responses, as you do in these markets, prices have nowhere to go but up.”

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