Conditions of overvaluation are easing nationwide and there is improvement in the vulnerability of the hottest markets.
CMHC has published its latest Housing Market Assessment and says that even in four markets where overvaluation is detected - Vancouver, Toronto, Victoria, and Hamilton – house prises are returning to levels that are supported by housing market fundamentals such as income, mortgage rates, and population.
This shift does not eliminate overall vulnerability in these hot markets though.
"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,” said Bob Duggan, CMHC’s chief economist. “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."
The HMA is for 15 CMAs and uses data as of the end of June 2018 and market intelligence as of the end of September 2018.
Nationally, 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.
However, evidence of overbuilding remains high in Edmonton, Calgary, Saskatoon, and Regina. That means those markets 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.