Canada's housing market remains highly vulnerable, even as overvaluation eases
OTTAWA, Oct. 25, 2018 /CNW/ - Canada's overall housing market remains highly vulnerable, however, conditions of overvaluation are easing as a whole, according to the most recent Housing Market Assessment (HMA) released today by Canada Mortgage and Housing Corporation (CMHC). While overvaluation is still detected in Vancouver, Victoria, Toronto and Hamilton, house prices are moving closer to levels supported by housing market fundamentals such as income, mortgage rates and population. That said, these markets continue to exhibit a high degree of overall vulnerability.
On a quarterly basis, CMHC issues the HMA to provide Canadians with both expert and impartial insight and analysis, based on the best data available in Canada. This report acts as an "early warning system" for the country's housing markets – an important tool supporting financial and housing market stability.
Results are based on data as of the end of June 2018 and market intelligence as of the end of September 2018. This national report provides the housing market assessment at the national level and summary assessment results for 15 Census Metropolitan Areas (CMAs). For each of these CMAs, CMHC also issues a local report with more information and analysis.
Key Market Highlights:
- At the national level the moderate rating of overvaluation is maintained as a longer period of improved alignment between house prices and fundamentals is required for overvaluation to be deemed low.
- Evidence of overbuilding remains high in Edmonton, Calgary, Saskatoon and Regina, so they continue to receive a moderate degree of vulnerability in the overall assessment.
- A low degree of overall vulnerability is sustained for Ottawa, Québec City, Moncton, Halifax and St. John's where house prices continue to follow the path of fundamentals.
- Montréal's resale market is close to overheating, creating significant upward pressure on prices as a result of a sharp tightening between supply and demand.
- In Winnipeg, evidence of overbuilding as well as the degree of overall vulnerability changed from low to moderate, reflecting increases in the inventory of newly completed but unsold units.
Assessments for Canada and all 15 CMAs can be found in the graph located in the release backgrounder.
CMHC defines vulnerability as imbalances in the housing market. Imbalances occur when overbuilding, overvaluation, overheating and price acceleration - or combinations thereof - depart significantly from historical averages.
As Canada's authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers objective housing research and information to Canadian governments, consumers and the housing industry.
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QUOTES:
"For the ninth consecutive quarter there continues to be a high degree of overall vulnerability at the national level, however, we are seeing conditions of overvaluation easing for Canada as a whole. Tighter mortgage rules, rising interest rates and weaker growth in inflation-adjusted personal disposable income—likely led to reduced demand for housing, resulting in the decline of house prices."
Bob Dugan
Chief Economist
Canada Mortgage and Housing Corporation
Backgrounder:
CMHC's HMA analytical framework is designed to evaluate the extent to which there are vulnerabilities in Canadian housing markets. The framework assesses housing market conditions and considers the incidence, intensity and persistence of four main factors:
- Overheating of demand in the housing market, wherein sales significantly outpace new listings.
- Acceleration in house prices, which could be partially reflective of speculative activity.
- Overvaluation in the level of house prices, which indicates that house price levels are not fully supported by fundamental drivers such as income, mortgage rates and population.
- Overbuilding of the housing market, when the rental market vacancy rate and/or the inventory of newly built housing units that are unsold is elevated.
Each of these factors is measured using one or more indicators of housing demand, supply and/or price conditions. The table below outlines the results from the previous release in July 2018 and the current October 2018 release.
SOURCE Canada Mortgage and Housing Corporation
Angelina Ritacco, CMHC Media Relations, 416-218-3320, [email protected]
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