Photo: Stewart Butterfield/Flickr
The Canada Mortgage and Housing Corporation (CMHC) believes the housing market in Canada faces a moderate level of risk as local markets face very different pressures. The corporation’s House Price Analysis and Assessment (HPAA) framework looked at 12 Census Metropolitan Areas and analyzed four concerns: overheating, acceleration in the growth of house prices, overvaluation and overbuilding.
The results differ greatly from city to city. The Toronto, Montreal and Quebec City metro areas were all rated as having moderate risk levels that exceed the national level. Though overvaluation is a concern, the CMHC flags Toronto and Montreal as facing greater overbuilding concerns.
“Condominium units under construction are near historical peaks. Inventory management is necessary to make sure that these condominium units under construction do not remain unsold upon completion,” the report noted.
Interestingly, the CMHC doesn’t consider the housing markets of Alberta cities to be high risk. The reason? The slow down in MLS sales in Calgary and Edmonton has led to more of a buyer’s market, which should put downward pressure on prices, lessening the risk of overvaluation in Calgary especially.
The CMHC did point to two cities where the risk level is high: Winnipeg and Regina. In Regina, the concerns are centred on price acceleration, overvaluation and overbuilding, particularly for condos. In Winnipeg, it’s overvaluation and overbuilding risks.
Out of the West Coast, the risk levels are low for Vancouver, despite it being the priciest market in Canada. The CMHC says none of the four risk factors were detected in the metro area.
“Average prices in Vancouver exceed the national average, although no overvaluation is detected. In comparison, average prices in Québec are below the national average and overvaluation is detected,” noted the CMHC in their explanation as to why sky-high prices don’t necessarily translate to overvaluation.
“Some centres in Canada, including Toronto and Vancouver, have historically supported relatively higher levels of prices based on a combination of factors such as historically attracting a large number of migrants and/or because of relative land scarcity.”