Moderate overvaluation and price acceleration continue to concern the CMHC which said Thursday that the Canadian housing market remains “highly vulnerable”.
In two reports, the agency said that construction is set to slow down by 2019 after a boost in 2017, but the level will remain close to the average from the past 5 years.
The markets considered highly vulnerable are Toronto, Hamilton, Vancouver, Victoria and Saskatoon with evidence of overbuilding in Calgary, Edmonton and St. John’s.
CMHC’s Housing Market Assessment includes the following highlights:
- Despite the recent easing in Toronto’s resale market, we continued to detect moderate evidence of price acceleration with strong growth in home prices among all housing types. High house prices could not be explained by fundamental economic drivers such as income and population growth.
- Hamilton’s housing market remained highly vulnerable for the fifth consecutive quarter. House prices continued to grow more quickly than levels supported by economic and demographic fundamentals.
- Vancouver’s housing market remained highly vulnerable, with evidence of moderate overheating and price acceleration, and strong overvaluation. Imbalances remained between demand and supply in the resale home market, especially for multi-family units.
- Victoria’s overheating persisted due to continued elevated sales for apartments and townhomes in the resale market, but very low inventories in the new home market of unsold homes to support the strong demand.
- The Quebec CMA market is now reported to have low levels of vulnerability. However, overbuilding remains an area of concern as we continue to see vacancy rates increasing for conventional rental housing.
The agency’s Housing Market Outlook forecasts a slowdown for new home construction; and for sales of existing homes to ease to around the level of 2016 (535,000 MLS sales).
Although it expects house prices to continue rising, it forecasts a slower pace with the national average in the range of $493,900 to $511,300 in 2017; and between $499,400 and $524, 500 by 2019.
“We continue to see a high degree of vulnerability in Canada’s housing market, fuelled by moderate overvaluation and price acceleration. House price growth continues to outpace economic fundamentals like household income and population growth. In 2018 and into 2019, housing starts are projected to decline while house prices should increase over the forecast horizon, but at a slower rate than in the past four years,” said chief economist Bob Dugan.
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