Hamilton among cities vulnerable to overvaluation

TORONTO — Continued signs of overheating in some cities leaves Canada’s housing market highly vulnerable for the sixth straight quarter, the federal housing agency said Tuesday as the country’s largest real estate board predicted another year of rising prices.

The Canada Mortgage and Housing Corporation said Tuesday that the country could fall prey to market instability. The cities of Toronto, Hamilton, Victoria and Vancouver are its greatest source of concern.

“This assessment is a result of the detection of moderate evidence of price acceleration and moderate evidence of overvaluation,” CMHC chief economist Bob Dugan said.

He noted that Manitoba, Quebec, and the Atlantic provinces are faring better than their Ontarian and British Columbian counterparts and that Calgary, Edmonton, Saskatoon and Regina are seeing rashes of overbuilding, but house prices there are in line with the population and its income.

He stressed that across the country there are only “weak” signs of overbuilding and overheating — a problem that has plagued the Greater Toronto Area in recent years.

The agency’s observations came the same day the Toronto Real Estate Board reported an 18 per cent drop in annual sales last year as the market started to cool from previous overheated conditions.

In its annual forecast released Tuesday, the board said it expects home sales this year to slip to somewhere between 85,000 and 95,0000, slightly lower than 2017 when there were 92,394 sales.

However, the real estate board also forecast that the average home will sell for between $800,000 and $850,000 — similar to TREB’s prediction for 2017.

“The midpoint of that range suggests a slight increase in the average selling price this year,” it said in the report.

The average selling price reached $822,681 last year.

The market is being dampened by the Ontario government’s moves to stabilize housing conditions after 2017 saw a busy first quarter, another interest rate hike from the Bank of Canada in January, a rise in fiveyear fixed mortgage rates and a new mortgage stress test brought in Jan.1.