Hamil­ton housing prices over­val­ued: re­port

CMHC as­sess­ment shows pop­u­la­tion growth, in­come and em­ploy­ment lev­els haven’t kept pace with ris­ing prices

The Hamilton Spectator - - LOCAL - cfragomeni@thes­pec.com 905-526-3392 | @Car­matTheSpec CARMELA FRAGOMENI

Hamil­ton homes are just as over­val­ued as Toronto and Van­cou­ver’s, ac­cord­ing to the lat­est Canada Mort­gage and Housing Cor­po­ra­tion (CMHC) quar­terly housing mar­ket as­sess­ment.

While the num­ber of houses sold last month in Hamil­ton fell 21 per cent com­pared to a year ago, the prices are still too high, Wed­nes­day’s re­port says.

And while “ev­i­dence of over­val­u­a­tion at the na­tional level re­mains mod­er­ate,” the ev­i­dence seen in Hamil­ton, Toronto, Van­cou­ver and Vic­to­ria re­mains strong.

Fac­tors taken into ac­count in de­ter­min­ing if the Hamil­ton mar­ket is over­val­ued in­clude in­come lev­els, em­ploy­ment and pop­u­la­tion growth, says An­thony Pas­sarelli, CMHC an­a­lyst for Hamil­ton.

“The pop­u­la­tion is not grow­ing to the ex­tent that you’d ex­pect to see with these prices,” Pas­sarelli said. “Same for em­ploy­ment.”

But Hamil­ton’s prox­im­ity to Toronto is the main cause of over­val­ued Hamil­ton prices, he said.

“Be­cause Hamil­ton is so close, it causes Hamil­ton’s prices to go up and be over­val­ued in re­la­tion to its lo­cal in­come, pop­u­la­tion growth and area em­ploy­ment,” Pas­sarelli said. “When you look at the prices, you would have thought those fac­tors would have grown.”

In other words, when you look just at Hamil­ton’s pop­u­la­tion, in­come and em­ploy­ment growths, they don’t jus­tify the prices homes are sell­ing for.

“Dou­ble-digit an­nual growth rates in a num­ber of house price mea­sures for Hamil­ton con­tin­ued to out­pace growth rates in real per­sonal dis­pos­able in­come per capita, em­ploy­ment and the young adult pop­u­la­tion of 25 to 34 years of age,” the CMHC re­port states.

It also says the ra­tio of full-time jobs to part-time jobs in Hamil­ton didn’t in­crease much, putting lit­tle up­ward pres­sure on real wages.

Pas­sarelli said the fac­tors are strong: The pop­u­la­tion growth is com­ing from peo­ple mov­ing here from Toronto and em­ploy­ment fig­ures are pos­i­tive, but they are not at the level that jus­ti­fies the housing prices here.

The CMHC’s as­sess­ment of the Cana­dian housing mar­ket is one with “strong ev­i­dence of prob­lem­atic con­di­tions” be­cause of slow growth in the young adult pop­u­la­tion, a de­crease in dis­pos­able in­come and the pickup in home price growth.

Its re­port acts as “an early warn­ing sys­tem” for the mar­ket, the cor­po­ra­tion states.

Pas­sarelli says the “prob­lem­atic con­di­tions” mean the mar­ket is left vul­ner­a­ble. It doesn’t nec­es­sar­ily mean you’ll lose your house if con­di­tions worsen, but it could mean a pe­riod when prices slow down for in­comes to catch up.

Pas­sarelli notes, how­ever, that the mar­ket has changed in re­cent months with price growth slow­ing down.

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