Overvaluation warning for Canada’s hottest market

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Toronto has been added to the Canada Mortgage and Housing Corporation’s list of the country’s riskiest housing markets, with the insurer citing a combination of price acceleration and overvaluation.

“The rise in house prices have not been matched by growth in personal disposable income, giving rise to a modest risk of overvaluation,” said Bob Dugan, CMHC’s chief economist, in a press release, pointing to the Toronto market.

However, the CMHC did not indicated whether Toronto investors, agents and buyers should expect a deceleration in prices.

The CMHC’s latest House Price Analysis and Assessment (HPAA) framework, which is designed to detect the presence of problematic conditions in Canadian housing markets, also pointed to a high level of risk in Winnipeg, reflecting risks of overvaluation and overbuilding, and in Regina, reflecting price acceleration, overvaluation and overbuilding, particularly of condo apartments.

Both Winnipeg and Regina were highlighted as risky markets in CMHC’s last report, published at the end of April. 

“Nationally, CMHC continues to detect a modest risk of overvaluation,” said Dugan. “However, our overall assessment of the risk of problematic conditions varies from centre to centre due to regional differences in housing markets. Imbalances in local housing markets could be resolved with further moderation in house prices or improving economic conditions.”

According to the report, the risk of problematic market conditions continues to be assessed as moderate for Montréal and Québec due to the detection of some risk of overvaluation.

In Toronto, Ottawa and Montréal, CMHC is monitoring the risk of overbuilding, with condos under construction near historical peaks. “Inventory management is therefore necessary to make sure that these condominium units under construction do not remain unsold upon completion,” added the report.

Low overall housing market risk is observed for Vancouver, as none of the individual risk factors are currently detected.
  • Henry on 2015-08-13 1:56:47 PM

    The same old story. They are saying it for the last 10 years but the price is increasing every year.

  • okay on 2015-08-13 6:15:45 PM

    Ponzi scheme is coming to the end and so does Heil Harper's Real Estate Party of Canada. Donald Trump is getting my vote in extra box.

  • bob on 2015-08-16 2:10:15 PM

    These guys are last to the Sky Is Falling party. They couldn't detect a fart in an elevator.

  • greg on 2015-08-16 6:50:29 PM

    Nothing lasts forever....what goes up must come down, you'll see

  • okay on 2015-08-18 7:41:31 AM

    PM’s promise comes too late


    Re Harper vows to track foreign home buyers (Aug. 13):

    The first home my wife and I bought (in 1981) was a condo townhouse in Mississauga, walking distance from Square One mall, for $65,000.

    At one of our condominium board meetings, I discovered that fully half the units had been initially purchased by a Chinese investor from Vancouver for $35,000 apiece, in anticipation of an influx of people moving here from Hong Kong.

    So for Canada Mortgage and Housing Corp., the banks or the government or (especially) the real estate industry to “not know” the extent of offshore purchases until this summer is, at best, willful blindness. But now that it’s far too late to matter, Prime Minister Stephen Harper promises to “track foreign home buyers.”

    And as if this isn’t sufficiently ludicrous, he will now permit people to harm their own retirements by withdrawing $35,000 from their RRSPs in order to buy homes at hugely over inflated prices.

    The Canadian Real Estate Agency – of course – “cheered” this proposal, as it will mean more sales! At higher prices! With better commissions!

    Kudos to Rob Carrick for having the courage to provide an honest and thorough analysis (The home front – Aug. 13) of this desperate and dishonest proposal.

  • Wolfram on 2015-08-18 10:43:05 AM

    Okay - enough, save your Harper trashing for Yahoo news or some other forum. No need for Trolls on this site.

  • Felix Vortsman on 2015-08-29 11:13:52 PM

    The foreign buyer issue pertaining to unsold condo units is simply nonsense. Appare

  • broker on 2015-09-01 1:04:19 PM

    If its so risky why do they continue to insure mortgages there?

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