Photo: CLS Research Office
Add another city in Ontario to the list of local Canadian real estate markets that the country’s housing agency says appears to be overvalued.
Hamilton, one of the hottest housing markets outside of Toronto and Vancouver, is now showing moderate signs of overvaluation, according to the latest quarterly market assessment from Canada Mortgage and Housing Corporation (CMHC).
The agency searches for evidence of four problematic conditions — which in addition to overvaluation include overheating, price acceleration and overbuilding — to come to overall assessments for 15 large real estate markets. In each category, it rates evidence as weak, moderate or strong.
“Price growth for single-detached homes has been stronger than warranted by increases in fundamental factors such as population, employment, and income,” says CMHC in its 13-page Housing Market Assessment.
By the end of the first quarter this year, the average price of a home in Hamilton-Burlington was $486,008, up 10 per cent from the same point one year prior, according to a recent RE/MAX report.
The realty company noted a “spillover effect” as househunters are turning to cheaper markets near Toronto, such as Hamilton and Barrie. This growing interest is leading to price increases in these outlying cities as buyers compete for relative bargains, suggests RE/MAX.
Alongside Hamilton, overvaluation evidence was mounting in the markets in Saskatoon and Vancouver, according to CMHC.
In both markets, the agency now says there is strong evidence of overvaluation, whereas last quarter there was only moderate evidence.
Outside increasing overvaluation in these three markets — and a subsequent upgrade in Vancouver’s overall assessment from weak to moderate — the latest assessment mirrors CMHC’s findings from the previous quarter.
Toronto still showed strong signs of overvaluation, while CMHC found nothing more than weak or moderate evidence of problematic conditions when it came to overheating, price acceleration and overbuilding.
Victoria and Halifax remained the only two markets in which CMHC says evidence of problematic conditions is weak across the board.
In a statement, Robyn Adamache, CMHC’s principal market analyst for Vancouver, pointed to prices in one particular segment of the city’s market when explaining the agency’s findings.
“Single detached home prices are higher than levels supported by economic fundamentals and inventories of new and resale homes are declining while demand remains high,” says Adamache.
Home prices in Greater Vancouver surged 23.2 per cent in March, compared to a year ago, according to the most recent numbers from the Canadian Real Estate Association.
In a research note sent out this morning, BMO’s senior economist Sal Guatieri says it’s about time CMHC flagged the massive year-over-year price surges in Vancouver.
“Better to ring the alarm bell late than never,” quips Guatieri, in the note titled “CMHC (Finally) Deems Vancouver Housing Overpriced.
“Rampant price gains north of 20 per cent this year surely got (CMHC’s) attention, though prices have been greatly outrunning incomes for the better part of the past decade,” he adds.