There is mounting evidence of risk in Canada’s real estate markets as home prices have climbed faster by to key related factors: population growth and income increases; a report by Canada’s Mortgage and Housing Corp, CHMC recently has shown. The report covers national housing market as a whole and 15 regional markets.
Canada Mortgage and Housing Corp. increased its risk rating for the national housing market on this past week to “strong”, from a moderate rating that it published in July.
“We now see strong evidence of problematic conditions overall nationally,” wrote Bob Dugan, CMHC’s chief economist. “This is fueled by overvaluation… meaning house prices remain higher than the level of personal disposable income, population growth and other fundamentals would support. This overvaluation coupled with evidence of overbuilding in some centres means that growth in house prices will slow and housing starts are expected to moderate in 2017 and 2018.” he went on to say.
CHMC also said it now sees moderate evidence of increased price acceleration; which occurs when home prices go up at a faster pace and and also a possible sign of speculation.
They are also predicting that home sales and new housing starts will decline next year, before stabilizing in 2018. The agency’s CEO Evan Siddall said earlier this month that “the housing agency would raise its risk rating to strong for the first time ever”.
Vancouver’s 15% foreign-buyer sales tax ( which began in May 2016 ) caused alot of people to think that most of those buyers would be steered into Toronto’s market. To what degree that has happened is now being evidenced; and the result is more distributed than previously thought. CMHC said there is strong evidence of problematic conditions in: Vancouver, Toronto and Hamilton, Calgary, Saskatoon, Regina. However: Edmonton, Winnipeg, Montreal and Quebec City show moderate evidence of such conditions, the agency said.
CHMC’s housing market assessment is intended to be an ‘early warning system’ to inform Canadians about problematic conditions that have developed and spread about the country’s real estate markets.
For more information and key comments from the CHMC, see this Globe and Mail article: http://www.theglobeandmail.com/report-on-business/rob-commentary/the-intended-consequences-of-new-housing-policies/article32383166/
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