There’s strong evidence of overvaluation in the country’s housing market, according to a Canada Mortgage and Housing Corporation (CMHC) report.
Its latest housing market assessment (HMA) finds that house prices across Canada remain higher than levels consistent with personal disposable income, population growth, and other fundamental factors.
The report says housing prices increased by 14% between the first quarter of 2015 and the first quarter of 2016, compared to an increase of 9% between the last quarter of 2014 and the last quarter of 2015. If Toronto and Vancouver were excluded from the price metric used, then the annual growth in real prices would have been only 5.9% in the first quarter, rather than 14%.
Some other highlights from the report show:
- Overvaluation and overbuilding remain the most prevalent problematic conditions observed across the 15 centres covered by the HMA.
- Overvaluation is detected in nine centres while overbuilding is detected in seven.
- Overall evidence of problematic conditions has increased since the previous assessment nationally as well as in Vancouver.
- Strong evidence of problematic conditions is seen in Vancouver, Toronto, Calgary, Saskatoon and Regina. In Toronto and Vancouver, this is due to the combination of price acceleration and overvaluation. In Calgary, Saskatoon and Regina, this is due to the combination of overvaluation and overbuilding.
- Moderate evidence of problematic conditions is seen nationally as well as in Edmonton, Winnipeg, Hamilton, Montreal, and Quebec.
- Evidence of overvaluation has increased since the previous assessment nationally and in Hamilton.
- Overall evidence of problematic conditions has decreased in Ottawa since the previous assessment.
CMHC defines evidence of problematic conditions as imbalances in the housing market. Imbalances occur when overbuilding, overvaluation, overheating and price acceleration, or combinations thereof depart significantly from historical averages.
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Flickr: Michael Gil