House overpricing in Canada spreads across the country
In Canada, house overpricing is spreading across the country. What started off in Toronto and Vancouver, with the Canada Mortgage and Housing Corporation’s list of overpriced markets, has now spread to Quebec City, Saskatoon, Hamilton and other parts of the country.
Canada Mortgage and Housing Corporation (CMHC) is a Crown corporation of the Government of Canada. It has been the country’s authority on housing for more than 70 years.
In CMHC’s last Housing Market Assessment (HMA), which was released on Wednesday, it added Hamilton, a port city with more than 670,000 inhabitants in the province Ontario, to its list of houses that are costing more than they are worth.
CMHC says it now detects strong evidence of overvaluation for Canada as a whole. “This national picture, however, reflects divergent patterns across the country,” says the Housing Market Assessment Report for Third Quarter 2016. (Image: Housing Market Assessment)
CMHC says evidence of problematic conditions in the country’s housing market as a whole has deteriorated from weak to moderate since its last report.
What are problematic conditions?
CMHC defines evidence of problematic conditions as the housing market imbalances that occur when overvaluation, overbuilding, overheating and price acceleration (or combinations) veer significantly from historical averages.
There is sufficient evidence in Vancouver to raise the overall assessment of problematic conditions in the housing market to high, the Crown corporation announced in a press release.
The HMA alerts Canadians to areas of concern developing in the country’s housing markets so that they may take action in a way that encourages market stability.
CMHC says it is raising its overall assessment for the country from a low level of evidence of problematic conditions to moderate. Changes in income and population are among the factors that have driven up prices. (Source: Housing Market Assessment)
Highlighted data from the HMA report:
– The most prevalent problematic conditions observed across fifteen centres are overbuilding and overvaluation.
– Overbuilding has been detected in seven centres.
– Overvaluation has been detected in nine centres.
– Since the previous assessment, overall evidence of problematic conditions exists nationally as well as in Vancouver.
– The combination of overbuilding and overvaluation were detected in Regina, Saskatoon, and Calgary.
– In Regina, Saskatoon, Calgary, Toronto and Vancouver, there is evidence of a combination of price acceleration and overvaluation.
– Moderate evidence of problematic conditions has been detected across the country as well as in Winnipeg, Edmonton, Quebec, Montreal and Hamilton.
– Since the previous assessment, overall evidence of problematic conditions in Ottawa has decreased.
Bob Dugan, Chief Economist at CMHC, said:
“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.”
“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.”
Robyn Adamache, Principal Market Analyst (Vancouver) at CMHC, said:
“Right now we’re seeing moderate evidence of overheating and price acceleration in Vancouver because supply is not keeping pace with demand.”
“We’re also continuing to see strong evidence of overvaluation mainly because single detached home prices are higher than those supported by economic fundamentals.”
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