Canadas housing sector faces high degree of instability for eighth quarter CMHC

first_imgTORONTO – Canada’s housing sector is facing a high degree of vulnerability to market instability for the eighth straight quarter with Toronto, Vancouver, Victoria and Hamilton taking on the brunt of the risks, said the Canada Mortgage and Housing Corporation.Those four markets were facing high risks because home prices remain higher than levels supported by the economy and cities’ demographics, said the Crown corporation in a quarterly report it released Thursday based on an analysis of overheating, overvaluations, overbuilding and accelerations in pricing in 15 regions across the country.“Despite the stability in these results, we note that the trends in both overvaluation and price acceleration have been moving in such a way that suggests that vulnerabilities are gradually dissipating,” said CMHC chief economist Bob Dugan, alluding to the recent slowdowns that have been seen in sales volumes and price growth in British Columbia and Ontario.“It can take awhile for that imbalance to solve itself. It is not so much that we are waiting for prices to fall (because) this imbalance can be resolved in any number of ways, whether prices slow or fundamentals grow more rapidly.”In Vancouver and Toronto, Dugan said more affordable forms of housing, including condos, have been the strongest contributors to price fluctuations.His corporation has detected signs of moderate overheating in Vancouver, although price growth has been slowing over the last two quarters and detached properties in some areas are seeing declining prices.In Toronto, CMHC said sales continued to trend lower in the first quarter of 2018, well below the threshold for overheating. The drop in sales and decline in the average price of single-detached homes, it found, continued to weigh on the overall average price.It said market conditions for condos continue to remain “tight,” contributing to stronger price growth for such housing.Meanwhile Ottawa, Winnipeg, Montreal, St. John’s, Moncton, Halifax fared much better. CMHC said they were among the regions with a low risk of vulnerability to market instability.However, CMHC said it was paying close attention to Winnipeg, where home prices are creeping up despite declines in personal disposable income, and Montreal, which it flagged last quarter as being a market to watch because of strong growth in house prices that could warrant a change to a moderate vulnerability rating if price acceleration persists.That moderate vulnerability rating is already being held by Edmonton, Calgary, Saskatoon and Regina because of overbuilding.The rating has been fuelled in Calgary and Edmonton by overbuilding because condo inventory is high, but in Saskatoon was driven by a price decline that has been “significantly larger” in the townhouse category where supply has been far exceeding demandIn Regina, CMHC attributed the moderate rating to downward pressure on home prices.last_img


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