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Instability in housing markets across Canada’s major metropolitan areas have kept the overall sector “highly vulnerable” for a seventh straight quarter, according to a recent report by the Canada Mortgage and Housing Corp. (CMHC), sustaining a streak that started toward the end of 2016.
“Our market assessment continues to show a high degree of vulnerability at the overall national level due to moderate levels of price acceleration and overvaluation existing together,” CMHC chief economist Bob Dugan said in a statement.
CMHC refers to vulnerability as imbalances in the housing market. Its assessment is based on four main factors:
· Overheating – when sales greatly outpace new listings
· Price acceleration – when house prices rise to quickly
· Overvaluation – when house prices are higher compared to the levels supported by personal disposable income, interest rates, and other fundamentals
· Overbuilding – when apartment rental vacancy rates and/or inventory of newly built and unsold housing units are higher than normal
Canada’s housing market vulnerability was particularly influenced by price hikes and overvaluation in Victoria, Vancouver, Hamilton and Toronto. The Crown corporation also saw evidence of overbuilding in Calgary, Edmonton, Saskatoon and Regina.
“We continue to see a high degree of vulnerability in the Hamilton housing market due to price acceleration and overvaluation. It’s important to note, however, that overvaluation is easing as house prices are moving further in line with disposable income, population growth and employment,” CMHC Hamilton senior analyst Anthony Passarelli said .
CMHC also observed a fair amount of variation in vulnerability by region. Montréal was rated as having a low degree of vulnerability, despite rapid growth in house prices is observed in certain neighbourhoods. Low vulnerability was also observed for housing markets in Winnipeg, Ottawa, Québec City, Moncton, Halifax and St. John’s.
