2 PRAIRIE CITIES RISKIEST: CMHC
Of 12 housing markets, Regina and Winnipeg only ones called high-risk
The country’s housing market is modestly overvalued although the Crown corporation that is in charge of housing policy sees high risk in only two of the 12 markets it surveyed.
On Thursday, Canada Mortgage and Housing Corp. released its house price analysis and assessment framework, a report aimed at detecting the presence of problematic conditions in housing markets.
“Modest overvaluation based on national indicators reflects a variety of price conditions across the country with some centres showing more signs of overvaluation than others. Likewise, housing market risk factors such as overheating, acceleration in house prices and overbuilding also vary by (metro areas),” said Bob Dugan, chief economist with CMHC, in a statement.
Regina and Winnipeg were assessed as the two riskiest markets in the country — both high-risk. In Regina, the problem is price acceleration, overvaluation and overbuilding, with condominium apartments singled out. In Winnipeg, the risk is overvaluation and overbuilding.
It’s the first time CMHC has released results for Winnipeg and Regina, and the agency has seen some improvement in market conditions compared with when it looked at those markets for internal purposes.
“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 five pounds that’s an improvement in your weight but that’s not enough to stop dieting,” said Dugan, during a conference call with journalists.
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 cities across the country.
“I would say the simple answer is Winnipeg is not at risk. I don’t know where CMHC is coming from,” said MacKenzie. “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 although 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, and along with Toronto a driver of national prices, is said to be in low-risk territory even as average detached single-family home prices stretch past $1.4 million in the local board’s reporting area.
“Despite high Vancouver home prices, demand for housing across the price spectrum is supported by a growing population and growth in personal disposable income,” the report says. “First-time home buyers focus on lower-priced options in suburban locales. At the upper end of the price spectrum, highnet-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. Employment growth, long-term population growth, and a limited supply of land for development provide further support to Vancouver prices.”
In Toronto, where the average sale price of a detached singlefamily 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,” the report says.
“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 upon completion.”
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,” the report says.
“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,” the report says. “This is expected to place downward pressure on house price growth, which could lessen the current risk of overvaluation in Calgary.”