Calgary might have been experiencing a robust housing market in the past few months, but a recent assessment conducted by the Canada Mortgage and Housing Corporation (CMHC) noted that the city’s apparent vitality is rooted on a weak foundation.
The latest CMHC report released on Wednesday (January 27) said that Calgary and several other cities exhibited “strong” evidence of problems in the real estate sector. The phenomenon of overbuilding, which can lead to dramatic price drops and an eventual glut in the market, was cited as the main culprit.
Overvaluation was pinpointed as another major contributing factor to the market’s weak fundamentals.
“In some cases, a correction in housing prices may be required in order to ensure excess supply is absorbed so balance in the market can be restored,” CMHC economist Bob Dugan told CBC News
Toronto, Saskatoon, and Regina also fell under the “strong” rating, with low oil prices in particular driving greater outbound migration, weakened incomes, and unemployment.
Edmonton, Montreal, Ottawa, Quebec City, and Winnipeg were rated as “moderate”, while the rest of Canada’s major cities had “weak” evidence of problems for the first quarter of 2016.