OTTAWA -- The Conservatives have held onto the late Jim Flaherty's suburban Toronto seat -- but their grip on the riding has been significantly loosened.

Tory candidate Pat Perkins has eked out a byelection victory in Whitby-Oshawa, fending off a surprisingly strong challenge from Liberal Celina Caesar-Chavannes.

With two-thirds of the polls reporting, Perkins, a high-profile, former two-term Whitby mayor, has taken 48 per cent of the vote -- just six points ahead of political newcomer Caesar-Chavannes.

Former finance minister Flaherty, who died suddenly last spring, took the riding with a comfortable 58 per cent in 2011, more than 30 points ahead of his nearest rival.

Support for New Democrat Trish McAuliffe, who came a respectable second to Flaherty in 2011 with 22 per cent of the vote, has collapsed to less than 8 per cent.

The close result, despite an all-out push by the Conservatives, suggests the resurgent Liberals may give the ruling party a run for its money in the crucial suburban ridings around Toronto -- a key battleground in next year's general election.