Overbuilding causing problems for house prices, CMHC warns

Saskatoon’s housing market continues to display evidence of overbuilding, overheating and price acceleration leading to “sustained downward pressure” on home prices, according to a new report from Canada’s mortgage insurer.

That means there is “strong evidence of problematic conditions” in Saskatoon, the Canada Mortgage and Housing Corp. (CMHC) said in its latest housing market report.

The city, which last month had a record-high number of real estate listings, is most affected by overbuilding, especially among apartments and condominiums, according to the report, which was released Wednesday.

“The elevated level of inventory in the multiples sector in the first quarter of 2017 continued to highlight strong evidence of overbuilding in Saskatoon’s new home market,” CMHC senior market analyst Goodson Mwale said in a statement.

While the strongest evidence suggests the city is overbuilt, there is also moderate evidence showing that its market continues to be overvalued, according to the report.

“While declining price trends and strong demographic growth have somewhat lowered the degree of overvaluation, other mitigating factors require that we continue to monitor this market before changing our assessment.”

According to the report, there is also weak evidence suggesting the city’s housing market suffers from overheating and downward price acceleration, according to the report.

CMHC’s latest report comes as home prices in the city are slipping downward — 1.7 per cent over the last three months, according to last month’s Royal LePage housing price report — against the national trend which is seeing rapid upward growth.

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