Market still flashing ‘red’, but some hope ahead
Canada Mortgage and Housing Corp. says it sees better housing market conditions than 90 days ago but the federal Crown corporation didn’t see enough improvement in the second quarter to remove its red warning label on the country as a whole.
The red tag is the strongest language used by CMHC for what it describes as problematic conditions in the housing market, something it slapped on the overall Canadian market two quarters ago.
“While the overall assessment for Canada has not changed from the previous quarter, the level of overvaluation has been downgraded to moderate. Regionally, eastern markets show weak evidence of overvaluation while this factor is stronger in western centres and markets in southern Ontario where economic f undamentals have not kept pace with recent price growth,” said Bob Dugan, chief economist with CMHC, in a statement.
CMHC says its quarterly Housing Market Assessment report provides an “early warning system” to alert Canadians about concerns the Crown corporation has about housing markets so people can take action. CMHC says the goal is to promote stability in the market.
Conditions are broken down into four categories, overheating, price acceleration, overvaluation and overbuilding. Each category gets a weak, moderate or strong rating and 15 centres are studied with an overall rating and then further overall rating produced for the country.
Five of the 15 received a red label for their overall category, down from six cities a quarter ago. Regina has been lowered to moderate evidence of overall problematic conditions. Still on the red list are Victoria, Vancouver, Saskatoon, Toronto and Hamilton.
The Ontario government announced moves last week to cool the housing markets in the Greater Golden Horseshoe, which includes both Hamilton and Toronto. Among the changes brought in were a 15 per cent tax on foreign buyers purchasing in the GGH, subject to certain exemptions.
CMHC says there is strong evidence of problematic conditions in both Toronto and Hamilton, when it comes to overvaluation, but weak evidence of overbuilding. Some in the real estate industry maintain provincial regulations have driven supply shortages to a point that March average resale prices in the Greater Toronto Area were up 33 per cent year over year.
“Rapid growth in house prices above rates warranted by economic and demographic fundamentals such as income and population growth has meant the continued detection of problematic conditions in the Toronto CMA housing market,” said Dana Senagama, principal market analyst for the Toronto region.
CMHC noted Toronto has seen four consecutive quarters of a sales-to-new listings ratio above 0.70 which is a problematic threshold that has led to “continued detection of moderate evidence of overheating” and is reflected in sustained evidence of price acceleration all housing types, with the average condominium apartment price growth quickly catching up to that of single-detached homes.
In Vancouver, where a 15 per cent tax on foreign buyers has been place since August and year- over- year average price increases have flattened out, there is still strong evidence of problematic conditions when it comes to overvaluation. Price acceleration is moderate in Vancouver and evidence is weak the market is overheating, said CMHC.
“However, the market for resale homes cooled unevenly. Moderately priced properties sold quickly and often over the asking price compared with higher priced homes,” according to the report.