Regina, Winnipeg riskiest housing markets: CMHC
The country’s housing market is modestly overvalued although the Crown corporation that is in charge of housing policy only sees high risk in 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 to 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 while 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.”
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,” according to the report.
“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. This is expected to place downward pressure on house price growth, which could lessen the current risk of overvaluation in Calgary.”