Problematic housing conditions in Canada are getting worse
By Lucas on Jul 27, 2016
The Canada Mortgage and Housing Corporation (CMHC) just released its latest Housing Market Assessment (HMA), announcing that overall Canada’s problematic housing conditions have shifted from weak to moderate.
CMHC has found evidence of overvaluation and overbuilding across 15 major centres covered by the HMA. The most problematic areas are Vancouver, Toronto, Calgary, Saskatoon, and Regina. In Toronto, price acceleration and overvaluation are the main issues.
“Our concerns continue about the evidence of price acceleration and overvaluation, therefore careful monitoring of both aspects is warranted,” says Dana Senagama, Principal Market Analyst (Toronto), CMHC.
Price acceleration, according to CMHC, is “partially reflective of speculative activity.” And overvaluation in the level of house prices is when pricing is not supported by fundamental drivers like income, mortgage rates, and population.
Vancouver
“For Canada overall, we now detect strong evidence of overvaluation. As a result, our overall assessment has moved from weak to moderate since the last report,” says Bob Dugan, Chief Economist, CMHC. “Moreover, the greater range of evidence of problematic conditions in Vancouver has led us to conclude that there is now strong evidence of problematic conditions in our overall assessment of the Vancouver housing market.”
British Columbia recently announced a new foreign-buyer tax in order to cool Vancouver’s market. It will take some time to see if this new tax actually has an effect on the market, but pundits are already saying that there are ways to avoid the tax, like getting a resident to make the purchase.
“Right now we're seeing moderate evidence of overheating and price acceleration in Vancouver because supply is not keeping pace with demand,” says Robyn Adamache, Principal Market Analyst (Vancouver), CMHC. “We're also continuing to see strong evidence of overvaluation mainly because single detached home prices are higher than those supported by economic fundamentals.”
Looking at CMHC’s comparisons chart, Halifax is the only housing market in Canada that is at a weak level of risk across the board. Is Halifax the country’s safest investment?
