No problems in Montreal — yet, CMHC says

Montreal’s housing market is showing few signs of “problematic conditions,” according to the Canadian Mortgage and Housing Corporation, but several trends are moving in that direction.

“In the first quarter of 2017, evidence of problematic conditions remained weak. The resale market continued to tighten, putting upward pressure on prices, but the favourable economic and demographic situation justified current price levels,” Marie-Claude Guillotte, a senior market analyst at CMHC, said in the crown corporation’s quarterly Housing Market Assessment.

The CMHC said it sees weak evidence of overheating in the Greater Montreal Area, with the seasonally adjusted sales-to-new-listings ratio at 60 per cent, well below the “problematic threshold” of 70 per cent.

The ratio is rising, the result of a decrease in new listings and an increase in sales, and the CMHC warns that this ratio “should continue to move closer to the problematic threshold” in upcoming quarters if sales continue to rise.

While house prices in Montreal are rising, the CMHC said it sees little evidence of price acceleration — with price growth below the “problematic” threshold.

“While evidence of price growth acceleration on the Montreal existing home market remained weak in the first quarter, this indicator will have to be closely monitored over the upcoming quarters. With the economic outlook remaining favourable to housing demand, it would not be surprising for market conditions to tighten gradually and cause, in turn, a faster increase in prices,” according to the report.

The CMHC describes its Housing Market Assessment as a type of early warning system, intended to identify possible problems in the housing marketplace.

Across Canada, the CMHC said there is “strong evidence of problematic conditions” driven by overvaluation and price acceleration.