Photo: Umair Khan/Flickr
A new report suggests there are cracks in at least four of the country’s biggest real estate markets.
In the Canada Mortgage and Housing Corporation’s latest quarterly market assessment of 15 census metro areas, released today, the agency says housing markets in Toronto, Regina, Saskatoon, and Calgary show “strong evidence of problematic conditions.”
To arrive at its overall evaluations, the CMHC considers four main factors: overheating, price acceleration, overvaluation and overbuilding. It then assigns an overall rating of weak, moderate, and strong, and also doles out ratings across the several categories.
For the prairie-based urban centres of Regina, Saskatoon, and Calgary, there is proof of overvaluation (or home prices not in line with incomes, mortgage rates, and the population) and overbuilding (which occurs when housing inventory surpasses demand), according to the CMHC.
“Low oil prices are impacting Alberta and Saskatchewan, weakening demographic and economic fundamentals such as migration, employment, and income, which are in turn affecting housing markets,” the national housing agency explains.
In Toronto, far away from the oil sands, the problems the CMHC see mainly stem from price acceleration, a possible sign of speculative investment, as well as overvaluation.
Though the agency said evidence of overbuilding was “weak” this quarter in the Toronto census metro area, the issue is on the CMHC’s radar. In particular, it cited the number of condo units currently being built there as something it was tracking.
“Inventory management therefore continues to be necessary to make sure that these condominium units under construction do not remain unsold upon completion,” the crown corporation warns.
There are currently 43,735 condo/apartment units under construction in the City of Toronto alone, according to BuzzBuzzHome’s Market Snapshot data. Some 18,154 of these units are expected to be completed this year, with construction expected to wrap up on another 20,172 units in 2017.
However, Toronto’s low vacancy rate — which the CMHC said was 1.6 per cent in October, compared to 3.3 per cent average across all census metro areas — coupled with a dearth of low-rise housing suggests condo “inventory could be steadily absorbed.”
Toronto was the only city that the CMHC flagged for price acceleration. The agency evaluates Hamilton as the lone market showing signs of overheating, but pegs evidence of “problematic conditions” as weak.