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Economists Douglas Porter and David Madani haven’t always seen eye to eye on the Canadian housing market.

Remember it was Porter, BMO’s chief economist, who once went so far as to call out Capital Economics’ senior Canadian economist for a price crash that never was, it appears.

But that’s all in the past: they’re on the same page in more ways than one now, separate commentary that the adversarial experts published this week suggest.

Each says that Toronto’s in a housing bubble, and both state a lack of supply is not the main catalyst for overheating, sparring with building industry arguments to the contrary.

Earlier this week Douglas Porter dropped “the pretence” and said “the Toronto housing market — and the many cities surrounding it — are in a housing bubble,” an idea Capital Economics has harped on for some time.

In his note, Porter elaborates that a “supply shortage” isn’t the cause of overheating. Specifically, he wants the building community to know housing starts for Toronto and Vancouver hit an annualized rate of 70,000 units recently, or “an all-time high.”

Then, this morning, Madani stayed on point with the usual bubble messaging while at the same time echoing Porter’s supply sentiment. Sort of.

“Toronto’s growing housing bubble is being blamed on desperate first-time buyers chasing a dwindling inventory of homes for sale, but that’s a red herring,” writes Madani.

However, while Porter attributes Toronto’s massive price increases to a medley of low interest rates, a population boom, and non-resident buyers, Madani has a different explanation.

“The truth is that it’s mainly being driven by move-up buyers leveraging the equity in their existing homes,” he says.

High Toronto detached home and townhouse prices generally put these listings out of reach for first-time buyers, Madani suggests.

“The upshot here is that first-time home buyers aren’t the ones driving the biggest gains in Toronto house prices, based on the simple logic that they simply don’t have high enough incomes to afford them, by any mortgage lender’s standard,” says Madani.

GTA home prices, including condos, soared 22.3 per cent to an average of $770,745 in January compared to that month last year, according to the Toronto Real Estate Board.

While condos are generally the most affordable option at an average price of $442,598 (up 14.5 per cent year-over-year) they only accounted for a 26-per-cent share of resale activity last year, according to Capital Economics.

“Existing homeowners, by leveraging their considerable housing equity to buy newer, bigger or more beautiful homes, are the primary driving force now boosting house prices in Toronto,” says Madani.

“If that’s the case, then it also stands to reason that there cannot be a major shortage of houses for people to live in, certainly not to the extent that the real estate cartel would have prospective buyers believe,” he continues.

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