The Crown Corporation reports an increase in worrying conditions in Canada’s housing market, and rings the warning bell for overvaluation in many cities.
“For Canada overall, we now detect strong evidence of overvaluation. As a result, our overall assessment has moved from weak to moderate since the last report,” Bob Dugan, CMHC’s chief economist, said. “Moreover, the greater range of evidence of problematic conditions in Vancouver has led us to conclude that there is now strong evidence of problematic conditions in our overall assessment of the Vancouver housing market.”
CMHC now believes overbuilding currently plagues seven markets, including; Calgary, Saskatoon, Regina, Winnipeg, Ottawa, Moncton, and St. John’s.
It has also identified overvaluation in nine markets. Those include; Edmonton, Calgary, Regina, Montreal (which CMHC argues there is moderate evidence of overvaluation) and Vancouver, Saskatoon, Hamilton, Toronto, and Quebec (where there is strong evidence).
“Right now we're seeing moderate evidence of overheating and price acceleration in Vancouver because supply is not keeping pace with demand,” Robyn Adamache, principal market analyst, Vancouver with CMHC, said. “We're also continuing to see strong evidence of overvaluation mainly because single detached home prices are higher than those supported by economic fundamentals.”
In Canada, overall, CMHC now believes there is strong evidence of overvaluation – up from moderate evidence in last quarter’s report.
However, its overall assessment for the country is that there is moderate evidence of problematic conditions.
“Driving the increased level of evidence has been increasing growth in housing prices that have pushed house prices to levels that exceed the fundamentals supporting the housing market. These fundamental factors include changes in income and population,” CMHC said in its report. “Prices have increased relative to fundamentals in Toronto and Vancouver, and are increasing rapidly in some other parts of Ontario and British Columbia. This pattern is not reflected in many other provinces, however.”