Forget Toronto and Vancouver -- CMHC is pointing to two other Canadian cities where properties are significantly overvalued.
In its most recent market update, the Canada Mortgage and Housing Corp. says overvaluation concerns are growing in Regina and Winnipeg because prices have outstripped family incomes and supply is dangerously high because of a condo boom.
In Regina, that increased supply has eroded resale prices. Compounding things is the growth in unsold construction starts, now at a record high. The CMHC contended, however, that builders have already been scaling back on production.
Similarly, in Winnipeg builders in the detached home market have begun to slow in response to increased inventories. Still condo builders are expected to continue on with projects already in the pipelne, the report says.
“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,” said Bob Dugan, CMHC’s chief economist. “Likewise, housing market risk factors such as overheating, acceleration in house prices and overbuilding also vary by CMA.”
The assessment, which considers risks associated with supply and demand, overbuilding, overvaluation and acceleration in prices, also pointed to overbuilding in the condo market in Toronto and Montreal as a reason for the moderate risk assessment in those two cities.
“Inventory management is necessary to make sure that these condominium units under construction do not remain unsold upon completion,” the report stated.
In Toronto, too, the CMHC said price growth that has exceeded growth in personal disposable income is also an issue, while overvaluation concerns in Montreal reflect slower growth in demand from first-time buyers.
Surprisingly, the national housing authority reported Calgary being at a low overall risk, despite some fears of overvaluation.
“The economy is being impacted by lower oil prices and slower inflows of migrants that will likely contribute to an expected slowdown in the rate of price growth in 2015,” the report stated. “There is also the potential for downward pressure in house prices given the decrease in MLS sales and the decrease in the sales-to-new listings ratio to levels consistent with buyer’s market conditions, which could alleviate the risk of overvaluation.”
Overall, the national market remains at a low risk, mainly because price growth remains just “slightly higher” than income and population growth.
“Overheating (and) acceleration in house prices and overbuilding are not a concern at this time,” the CMHC said.