Toronto and Hamilton highlight evidence of overvaluation, CMHC says
One day after the Bank of Canada raised its overnight lending rate – and hinted at further increases in the near term – the Canadian housing market got another sobering reminder this week: the latest Housing Market Assessment (HMA) from Canada Mortgage and Housing Corp. (CMHC).
CMHA warns that Canada’s overall housing market remains highly vulnerable, though conditions of overvaluation are easing as a whole.
The quarterly report acts as an “early warning system” for the country’s housing markets – an important tool supporting financial and housing market stability.
In Ontario, Toronto and Hamilton home prices are moving closer to levels supported by housing market fundamentals such as income, mortgage rates and population. Still, these markets continue to exhibit a high degree of overall vulnerability.
Toronto continues to show moderate evidence of overheating and price acceleration, and strong evidence of overvaluation, CMHC says. On the plus side, there is weak evidence of overbuilding, as the number of completed and unsold units is at a historic low.
In Hamilton, moderate evidence of overheating exists, due to a high sales-to-new listings ratio in eight of the last 12 quarters. Price growth has persisted over the last 12 quarters, contributing to moderate evidence of price acceleration. Overvaluation in Hamilton has decreased on average, but moderate evidence remains since house prices are considerably higher than levels supported by economic fundamentals, CMHC says.
OTHER MARKET HIGHLIGHTS
- Evidence of overbuilding remains high in Edmonton, Calgary, Saskatoon and Regina, so those markets continue to receive a moderate degree of vulnerability in the overall assessment.
- A low degree of overall vulnerability is sustained for Ottawa, Quebec City, Moncton, Halifax and St. John’s where house prices continue to follow the path of fundamentals.
- Montreal’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.