The Crown corporation which monitors the housing market in the country is coming around to the view that there may be some overvaluation and overbuilding in some Canadian cities.
Canada Mortgage and Housing Corp. said Wednesday that overvaluation can be “detected” in nine of the 15 cities it monitors with overbuilding recorded in seven.
“While we see weak evidence of problematic conditions for Canada, we do detect moderate evidence of overvaluation. This means that house prices are higher than levels that can be supported by fundamental factors such as income growth and population growth,” said Bob Dugan, chief economist with CMHC.
CMHC’s valuation is part of its quarterly Housing Market Assessment, something the Crown corporation calls an early warning system, alerting Canadians to areas of concern developing in our housing markets so that they may take action in a way that promotes market stability.
Since its last assessment, CMHC added Vancouver, Hamilton, and Saskatoon to cities where housing prices may be overvalued. The averaged detached home in metro Vancouver is almost $1.8 million today and prices are rising about 23 per cent year over year in Canada’s most expensive city for home ownership.
The Crown corporation says there “strong evidence of problematic conditions” in the overall market for Toronto, Calgary, Saskatoon and Regina. Toronto’s issues are price acceleration and overvaluation. In Calgary, Saskatoon and Regina, the issue is a combination of overvaluation and overbuilding.
CMHC defines problematic conditions as imbalances in the housing market that occur when overbuilding, overvaluation, overheating and price acceleration, or combinations of those issues exceed historical norms.
Source(s): CMHC and The Globe and Mail.