CMHC identifies Canada's most vulnerable housing markets

by Neil Sharma06 Aug 2019

According to the Canada Mortgage and Housing Corporation, the national housing market is moderately vulnerable, however, the same cannot be said of Toronto, Hamilton and Victoria, which the government agency has deemed high-risk.

Toronto, according to CMHC’s latest Housing Market Assessment, is an overheated market where price acceleration and overvaluation remain worrying, although the latter is beginning to fall in line with housing market fundamentals. During the first quarter of 2019, inflation-adjusted disposable income decreased 0.6% as the young adult population grew by 3.7%.

“The latter effect dominated, which helped to ease overvaluation conditions by supporting growth in price levels consistent with housing market fundamentals,” said the report. “The evidence of overbuilding remains low. Market activity has become stronger since the first quarter of 2019 with the sales-to-new listings ratio trending higher (albeit still remaining within balanced market territory) and the MLS average price increasing since April 2019.”

Hamilton has also been flagged as an overheating market, as, like with Toronto, price acceleration and overvaluation continue disquieting CMHC.

“Inflation-adjusted resale home prices grew modestly on a year-over-year basis. Price growth is supported by slightly higher sales activity than a year ago. The inventory of completed and unsold new homes remains small, providing low evidence of overbuilding.”

However, while Victoria is flagged for its high degree of vulnerability, there was only moderate evidence of overvaluation. After 15 consecutive quarters of year-over-year increases, the inflation-adjusted MLS average price decreased 5.8% in the first quarter of this year compared to Q1-2018.

“The decline in price and growth in fundamentals have helped to narrow the average estimate of overvaluation in Victoria.”

Vancouver is assessed to exhibit a moderate degree of overall vulnerability.

“Moderate sales and a greater availability of listings on the resale market continue to signal low evidence of overheating, while low inventories of completed and unsold new homes and a low vacancy rate in the rental market suggest that there is low evidence of overbuilding.”


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