Canada’s most overvalued houses are not where you think.

Forget T.O. or Vancouver: Most overvalued houses are on the Prairie, CMHC says

The country’s housing market is modestly overvalued although the Crown corporation in charge of housing policy only sees high risk in two of the 12 markets it surveyed.

“Modest over valuation based on national indicators reflects a variety of price conditions across the country with some centres showing more signs of overvaluation than others,” said Bob Dugan, chief economist with Canada Mortgage and Housing Corporation, in a statement Thursday after the release of its semi-annual report, designed to detect the presence of problematic conditions in housing markets.

Regina and Winnipeg were assessed as the two riskiest markets — both high risk.

In Regina, the report cited problems of price acceleration, overvaluation and overbuilding, with condominium apartments singled out. In Winnipeg, the risk is overvaluation and overbuilding.

“If you go to the doctor and you’re overweight, he tells you to lose weight. If you’re 100 pounds overweight, if you lose 5 pounds that’s an improvement in your weight but that’s not enough to stop dieting,” said Mr. Dugan, during a conference call with journalists.

It’s the first time CMHC has released results for Winnipeg and Regina and the agency has seen some improvement in market conditions compared to when it looked at those markets for internal purposes.

David MacKenzie, president of the Winnipeg Realtors Association, said he sees market conditions as being balanced and maintains his city is the second cheapest place to buy a home of all major Canadian cities. “I would say the simple answer is Winnipeg is not at risk. I don’t know where CMHC is coming from,” MacKenzie said.

“There is a lot of inventory. Developers are not going to put down their hammer for projects already committed to. They won’t slow down waiting for the markets to catch up. It’s still a healthy market right now. I don’t know how you can describe it as high risk.” The average price of a home sold in Winnipeg in March was $281,269, a one per cent increase from a year earlier.

Benjamin Tal, deputy chief economist with CIBC World Markets Inc., said it’s important to note that while CMHC might be ascribing a certain risk to a market, it doesn’t mean anyone is suggesting a crash. “This reflects price relative to potential purchasing power of potential buyers,” said Tal. “This is why you see places like Winnipeg and Regina lagging behind.”

Vancouver, the most expensive market in the country, is said to be in lowrisk territory even as average detached single-family home prices stretch past $1.4 million.

“Despite high Vancouver home prices, demand for housing across the price spectrum is supported by a growing population and growth in personal disposable income,” according to the report. “First-time home buyers focus on lower-priced options in suburban locales. At the upper end of the price spectrum, high-net-worth residents, and those who have gained equity in their homes, are more likely to buy single-detached homes in central locations and luxury properties.”

In Toronto, where the average sale price of a detached single-family home shot past $1 million this year, there is moderate risk.

“Risk of overvaluation is due to steady price growth that has not quite been matched by growth in personal disposable income,” according to the report. “The level of completed and unsold units and the rental vacancy rate are both below their respective historical averages. However, condominium units under construction are near historical peaks. Inventory management is necessary to make sure that the currently elevated number of condominium units under construction does not remain unsold.”

In Alberta, which has watched housing sales plummet with the price of oil, CMHC sees low risk.

“[Calgary and Edmonton] are currently assessed as low overall risk, despite a risk of overvaluation in Calgary,” according to the report.

“However, sales have declined in recent months in these [metro areas], pushing the sales-to-new listings ratio to buyers’ market levels, reflecting the impact of lower oil prices on housing demand in these oil-producing centres. This is expected to place downward pressure on house price growth, which could lessen the current risk of overvaluation in Calgary.”