Housing report rings alarm bells
CMHC analyst says imbalances in Canadian market are driving up prices at an unsustainable level
A report by Canada’s national housing agency says evidence of problematic conditions in the country’s housing market as a whole has risen from weak to moderate, and Hamilton is among those cities affected.
Real estate markets in Hamilton, Edmonton, Winnipeg, Montreal and Quebec are exhibiting moderate evidence of imbalances, said the report by the Canada Mortgage and Housing Corporation.
It found strong evidence of such conditions in Toronto, Calgary, Saskatoon and Regina.
The agency also rang more alarm bells about Vancouver’s real estate sector in the report released Wednesday, saying there is now strong evidence of problematic conditions in that city.
CMHC analyst Abdul Kargbo said the three big housing drivers are not looking great for Hamilton. Population growth, thought to be healthy from Torontonians moving in, is dampened by an exit of Hamiltonians priced out by the market; income is growing at a slower rate than expected, and unemployment is rising.
“Prices are basically growing at levels that are not supported by fundamental drivers,” he said.
If prices slow their rise, and the big drivers rebound, a “soft landing” for the housing market is possible, said Kargbo.
Considering the economic outlook for Hamilton is positive for 2017 and 2018, that is a possibility, he added.
The high sales-to-listing ratio in the Burlington and Hamilton area creates a bit of an imbalance for buyers, said George O’Neill, CEO of the Realtors Association of Hamilton-Burlington.
“There are just not enough properties for buyers,” which drives up prices, said O’Neill.
The billion-dollar question, wonders O’Neill: “Is there a bubble?”
Demand for housing outweighing supply could simply be a function of Toronto residents seeking out cheaper prices in Burlington and Hamilton, the improvement of GO Train service and Hamilton job creation — but it’s difficult to say for sure, he says.
“There are some underlying fundamentals that are shifting.”
The CMHC says imbalances occur when overbuilding, overvaluation, overheating and/or price acceleration depart significantly from historical averages.
The assessment is intended to be an early warning system to alert Canadians about problematic conditions developing in the country’s real estate markets.
It covers 15 regional markets and the national housing market as a whole.