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Not even the 1% can afford a house in Toronto

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Economists from the major Canadian banks were, on the whole, non-plussed by rising home prices until mid-2016 but this stance has changed dramatically in recent months. Wednesday, Bank of Montreal's Doug Porter walked readers through a hypothetical example of a Canadian household with income close to the top national percentile, and even they couldn't afford a house in Toronto,

"Working through some basic assumptions shows that the absolute maximum home they could qualify for would be just over $987,000. Surely, this will be enough to afford a reasonable place? … Lo and behold, the average detached home price in Toronto (the 416 region) is now a cool $1.57-million, putting it well out of reach… so they look into the surrounding regions (the 905 belt) for a detached home. Turns out, the average price there is $1.11 million. Strike two. Okay, a semi-detached in Toronto would be acceptable, as long as the biker gang in the next-door unit is mostly quiet. Turns out, the average price is $1.08-million. Strike three.

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CIBC economics department chimed in by noting, "Policy makers are needed because the GTA is not a normally functioning market."

"@SBarlow_ROB Porter on Toronto housing prices ' – (research excerpt) Twitter

"'Toronto is an unaffordable city': CIBC urges more rental properties to help cool market" – BNN

Fed chairwoman Janet Yellen announced an interest rate increase Wednesday as expected, but market reaction was not what many investors were positioned for. The dovish nature of the Fed statement – it did not raise economic growth forecasts or signal it was in any hurry to hike further – resulted in bond yields and the U.S. dollar falling, equities and oil prices rallying, and precious metals moving higher.

"Fed's 'dovish hike' sends shares to record highs, dollar dips" – Reuters

"The Fed Delivers a Hike and a Message" – Mohamed El-Erian, Bloomberg

"Yellen Calms Fears Fed's Policy Trigger Finger Is Getting Itchy" – Bloomberg

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"What you need to know after FOMC meeting" – Financial Times

Canada's consumer watchdog organization, the Financial Consumer Agency of Canada, announced an official probe in to sales practices at the major banks,

"Financial institutions' compliance with these rules is non-discretionary and the message must be disseminated from the boards of directors on down to customer-facing staff," [Lucie Tedesco, commissioner of the Financial Consumer Agency of Canada] said,

"Through the industry review we are announcing today, we will examine financial institutions' business practices in relation to express consent and disclosure, including the identification of any factors that may be contributing to non-compliance."

"Major Canadian banks under review for business practices" – Macleans

Tweet of the Day: "@jeffspross Oh hey look Trump wants to fiscally gut American society. No big deal. bloomberg.com/politics/artic… " – Twitter

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Diversion: "100 websites that rule the internet " – Visual Capitalist

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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