The Canada Mortgage and Housing Corporation (CMHC) says it has found "strong evidence of problematic conditions" in the Canadian housing market.
In the Housing Market Assessment (HMA) report released yesterday, CMHC says home prices have risen faster than economic fundamentals such as personal disposable income and population growth. This has led to overvaluation and overbuilding in several of Canada’s major housing markets. The CMHC describes the HMA as "an early warning system" which alerts Canadians to areas of concern.
The report points to Vancouver and Toronto as problem areas, saying that they are both subject to overheating, price acceleration, and overvaluation. As for the prairie cities of Calgary, Saskatoon, and Regina, their strongly problematic ratings remain unchanged, reflecting the joint effect of overbuilding and weaker economic fundamentals. The cities of Victoria and Hamilton are also on the radar: the former shows signs of acceleration and overheating and concerns over the latter have increased from moderate to strong. CMHC says its analytical framework has also found moderate evidence of problematic conditions in Winnipeg, Montréal, and Québec City.
"To summarize, our change in the overall assessment for Canada as a whole from moderate to strong evidence of problematic conditions reflects two effects. Firstly, there is increased evidence of growth in house prices and its intensification for cities within Ontario and British Columbia, as foreshadowed in last quarter’s HMA," reads the report. "Secondly, it reflects the continuing challenges to housing markets in oil-dependent provinces of the prolonged period of low oil prices."