Overbuilding evident in some markets despite lower vulnerability

by Ephraim Vecina07 May 2019

Despite moderate levels of housing vulnerability in Calgary, Edmonton, Regina, Saskatoon, and Winnipeg, evidence of overbuilding in these markets remains, according to the latest Housing Market Assessment by the Canada Mortgage and Housing Corporation.

“In Edmonton, where the rental market is tightening, the imbalance between supply and demand in the ownership market is widening. As of February 2019, 61% of the total single- and semi-detached inventory in Alberta’s seven largest markets combined were in Edmonton,” the report explained.

However, the study assured that some troubling signs aside, the national housing sector has generally moved to more resilient conditions after 10 straight quarters of considerably high vulnerability.

Slower price growth has been cited as a main factor in the trend, and “even though moderate evidence of overvaluation continues for Canada as a whole, there has been improved alignment overall between house prices and housing market fundamentals in 2018 in comparison to the previous year,” CMHC chief economist Bob Dugan stated.

Vancouver, Victoria, Toronto, and Hamilton are still considered in high vulnerability status, although these markets are also moving “closer to levels supported by housing market fundamentals such as population, personal disposable income and interest rates.”

In particular, Vancouver’s “home price growth over the past few years significantly outpaced income growth; these imbalances are now unwinding based on continued growth in economic fundamentals and lower resale home prices.”

Similarly, Toronto’s “market activity continued to cool during the first quarter of 2019, with the sales-to-new listings ratio remaining firmly in balanced market territory and the MLS® average price continuing to decrease.”

 

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