Oct 25, 2018
By Michael Kramer
Real estate prices may be showing signs of a cool-down but The Canadian Mortgage and Housing Corporation says the country’s housing market remains “highly vulnerable.”
The agency says stricter mortgage rules, rising interest rates – and smaller growth in inflation-adjusted disposable income – has led to less demand for housing and a decline in prices.
But despite all that – markets in Toronto, Hamilton, Vancouver and Victoria are still considered to have a “high degree of overall vulnerability” – even though house prices are moving more in line with housing market fundamentals – such as income, mortgage rates and population.
CMHC says it sees vulnerability because there are imbalances in the housing market – attributed to overbuilding, overvaluation, overheating and price acceleration.
As an example, the agency cites what happened in the 1980s and early 1990s in Toronto – when a housing bubble caused real estate prices to skyrocket in a short span of time.
The agency’s report noted that there continues to be overbuilding out west – where rental vacancy rates or inventory of unsold new-builds are higher than normal in Edmonton, Calgary, Saskatoon, and Regina.
And of particular concern is Winnipeg – where inventory of newly completed but unsold units – have been accumulating for the past two quarters.
Meanwhile, housing prices in Montreal continue to be at levels equal to economic and demographic activity – but still, the resale market is described as “close to overheating” as demand begins to outstrip supply.
The findings come in CMHC’s quarterly Housing Market Assessment report – which is meant to gauge the stability of the national real estate market.
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