Photo: James Bombales

Most Canadian housing markets have seen overvaluation concerns ease over the past two quarters, as housing activity continues to adjust to rising interest rates and stricter mortgage rules. But, according to a new release from the Canada Mortgage and Housing Corporation (CMHC), some markets remain in a vulnerable position.

In its latest report, the CMHC listed Vancouver, Victoria, Toronto and Hamilton as cities with a “high degree of overall vulnerability.” But there was one surprising market that the organization warned was at risk of overheating.

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“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,” reads the CMHC release.

The city’s seasonally adjusted sales-to-new-listings ratio was close to 66 percent in the second quarter of 2018, placing it firmly in sellers market territory. A ratio of between 40 to 60 percent is considered balanced, with readings above and below indicating sellers and buyers markets, respectively. CMHC called Montreal’s current ratio “just below the threshold for problematic conditions.”

“The active listings-to-sales ratio, continued to decrease, thereby also showing the Montreal resale market has been tightening and increasingly favourable to sellers,” writes Marie-Claude Guilotte, an economist for CMHC, in the release.

The market has been tightening for the past two quarters, with the single-family segment entering sellers’ territory in the first quarter, and the condo segment following behind in the second.

The report’s findings echo those of Scotiabank senior economists Marc Desormeaux and Adrienne Warren, who wrote earlier this year that the city would likely see its strong performance continue into 2019.

“We expect further upward pressure on prices this year, given tight demand-supply conditions,” wrote Desormeaux and Warren. “The ratio of sales to new listings remains firmly in sellers’ territory at 67.5 in April…Market conditions have tightened across all property categories.”

While the risk of overheating remains, Guilotte writes that the market has a ways to go before it would become a significant concern.

“Over the coming quarters, it is expected that the economic outlook will remain favourable to housing demand and that the market will continue to tighten,” she writes.

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