Canada Mortgage and Housing says there is overvaluation and overbuilding

Canada Mortgage and Housing Corporation (CMHC) released its Housing Market Assessment (HMA) report formerly known as the House Price Analysis and Assessment (HPAA) that evaluates the extent to which there is evidence of problematic housing market conditions in 15 Census Metropolitan Areas (CMAs).

When four factors were considered – overheating, price acceleration, overvaluation and overbuilding – Toronto, Winnipeg, Regina and Saskatoon showed the strongest risk of problematic conditions, the report concluded.

He said that housing price levels in Toronto, Vancouver, Montreal, Edmonton and Saskatoon are “not fully supported by economic and demographic factors”.

C-M-H-C says an overbuilding of condo units may also be emerging in Toronto, Montreal and Ottawa, and it is monitoring those markets for developments.

The pace of existing-home sales in the capital region trended higher in the second quarter of 2015, particularly for single-family houses, the report said.

“Problematic overvaluation conditions in local housing markets could be resolved by moderation in house prices and/or improving economic conditions”, said Dugan. In Toronto, strong evidence of problematic conditions reflects a combination of price acceleration and overvaluation.

That clearly didn’t go over well.

This time around, the colours had taken a back seat, and the word “risk” had disappeared.

Those city “moderate” signs of problematic conditions are: Ottawa, Montreal and Quebec city.

At the national level, the report rates overevaluation as moderate.

This week, the federal housing agency also warned that housing starts and house sales are likely to slow over the next two years, and house price gains slow – but not decline – as the market cools across the country. Toronto prices have climbed 72 per cent in that period and Vancouver prices are up 51 per cent. But the supply of a wide range of housing types continues to provide choice for home buyers at all price points. The CMHC is keeping an eye on both cities, including Toronto, for potential overbuilding of condominium apartments.

The price of oil declined which slowed employment growth as well as overall population growth and that has contributed to the overvaluation rating in the city, said Cho. “Given the expectation of further job losses and significant declines in net migration housing demand will likely remain weak”.