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Chart: RBC

Royal Bank of Canada has flagged weaknesses in all four of Canada’s biggest housing markets.

Although RBC hasn’t given a clean bill of health to real estate in Calgary, Montreal, Toronto and Vancouver, the big bank still says “a potentially destabilizing downturn” is not around the corner.

“Nationwide, recent market developments have been both positive and negative,” according to RBC’s most recent Canadian Housing Health Check report, authored by Chief Economist Craig White and Senior Economist Robert Hogue.

“The probability that a steep and widespread downturn would take place in Canada’s housing market in the next 12 months remains low,” the economists write in the report, assessing four markets in detail.

Toronto

“Toronto is showing increasing signs of overheating,” the report reads. On the heels of a record year for resales, home prices in the Ontario capital are becoming increasingly unaffordable.

RBC says it’s looking more like policymakers will step in to try and temper the risks that disintegrating affordability poses to Canada’s most active major market. To date, Ontario Premier Kathleen Wynne has shown no interest a foreign-buyer tax like the one BC applied to Metro Vancouver.

Vancouver

Home prices in Vancouver have been falling in recent months. According to the Real Estate Board of Greater Vancouver, the average price had dropped 3.1 per cent in three months as of December. RBC still considers the market to offer “extremely poor affordability,” which is says is a major vulnerability.

Vancouver does have “solid economic underpinnings,” however, and for that reason RBC doesn’t expect the market to crash. “The Vancouver market appears to be adjusting in an orderly fashion,” says RBC, referring to the effects of Metro Vancouver’s foreign-buyer levy.

Calgary

More condos and rental units are sitting empty in Calgary due to job losses, an outcome from the lower price of oil, a resource that’s a major contributor to Alberta’s economy. This poses an abnormally high risk to Cowtown real estate, according to RBC’s analysis.

“Still, a recent drop in condo construction and a slightly improving trend for home resales have been positive developments suggesting that risks might ease in the period ahead,” the report states.

Montreal

Compared to what Montreal’s housing market can actually absorb, builders there have been starting construction on too many multi-family projects, including condo developments.

Yet the city has recorded back-to-back years of increasing resale activity. And in recent months, the labour market has been improving. “The earlier home inventory issues continue to evolve constructively,” says the report, noting this housing market is becoming less vulnerable to a downturn.

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