Home prices have fallen in overheated parts of the country but Canada Mortgage and Housing Corporation (CMHC) says the real estate market remains vulnerable.
CMHC says third-quarter price declines in Toronto and Victoria aren’t enough to warrant removing the label, which has been in place for ten quarters in a row. But CMHC says that could change.
“Nationally, overheating and overbuilding remain low. It should also be noted that price acceleration may be downgraded in upcoming reports which would lead to Canada’s overall vulnerability moving from high to moderate, provided other HMA (Housing Market Assessment) factors do not change,” says Bob Dugan, Chief Economist at CHMC, in the report.
CMHC is particularly concerned about Vancouver, despite falling sales and prices.
“While imbalances in Metro Vancouver’s housing market have eased in recent quarters, home price levels are high relative to local economic fundamentals, leading to CMHC’s continued detection of overvaluation,” says CMHC in the report.
CMHC also sees moderate overvaluation in Hamilton as well as Toronto.
“In the Greater Toronto Area, overvaluation has changed from high to moderate due to the gaps between actual house prices and price levels estimated by fundamentals narrowing,” says Dana Senagama, analyst at CMHC, in the report.
Year-over-year growth in the average house price and real personal disposable income was modest in the third quarter of 2018, and was outpaced by economic and demographic factors, such as full-time employment and the young-adult population, which grew by 3.68 per cent.”