CMHC Assessment Points to Potential Impact of Home Price Growth in Vancouver and Toronto on Canadian Market

Multimedia content available

OTTAWA, July 27, 2016 — Evidence of problematic conditions in Canada’s housing market as a whole has increased from weak to moderate since the last report, according to the latest Housing Market Assessment (HMA) released today by the Canada Mortgage and Housing Corporation (CMHC). In Vancouver, we now have sufficient evidence to raise our overall assessment of problematic conditions in the Vancouver housing market to high.

The HMA serves as an early warning system, alerting Canadians to areas of concern developing in our housing markets so that they may take action in a way that promotes market stability.

 
Transcript

Foreground: Bob Dugan, Chief Economist, CMHC

Background: Library setting, library shelving

Bob Dugan: “For Canada overall, we now detect strong evidence of overvaluation. As a result, our overall assessment has moved from weak to moderate since the last report. Moreover, recent trends in Vancouver have led us to conclude that there is now strong evidence of problematic conditions in our assessment of that market.”

 

Report Highlights

  • Overvaluation and overbuilding remain the most prevalent problematic conditions observed across the 15 centres covered by the HMA.
  • Overvaluation is detected in 9 centres while overbuilding is detected in 7.
  • 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. For examples, please consult the Overview section of the national report.

The complete HMA, including national, regional and CMA insight and analysis, is available on our website.

In order to access future Market Analysis Centre publications from CMHC, please subscribe to Housing Observer Online.

As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers objective housing research and information to Canadian governments, consumers and the housing industry.

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“For Canada overall, we now detect strong evidence of overvaluation. As a result, our overall assessment has moved from weak to moderate since the last report. Moreover, the greater range of evidence of problematic conditions in Vancouver has led us to conclude that there is now strong evidence of problematic conditions in our overall assessment of the Vancouver housing market.”

— Bob Dugan, Chief Economist, Canada Mortgage and Housing Corporation

Robyn Adamache

“Right now we're seeing moderate evidence of overheating and price acceleration in Vancouver because supply is not keeping pace with demand. We're also continuing to see strong evidence of overvaluation mainly because single detached home prices are higher than those supported by economic fundamentals.”

— Robyn Adamache, Principal Market Analyst (Vancouver), Canada Mortgage and Housing Corporation

Information on This Release:

Jonathan Rotondo
Media Relations
613-748-2734
jrotondo@cmhc.ca

CMHC Media Content Available for this News Release:

  • National Video Clip - English (8.34 MB)
  • Calgary Video Clip - English (6.93 MB)
  • Halifax Video Clip - English (4.21 MB)
  • Montreal Video Clip - English (9.50 MB)
  • Toronto Video Clip - English (7.22 MB)
  • Vancouver Video Clip - English (7.43 MB)

Download this Media Package (ZIP - 42.5MB)

Backgrounder

CMHC’s HMA analytical framework is designed to evaluate the extent to which there is evidence of problematic conditions in Canadian housing markets. The framework assesses housing market conditions and considers the incidence, intensity and persistence of four main factors:

  1. Overheating of demand in the housing market, wherein sales significantly outpace new listings.
  2. Acceleration in house prices, which could be partially reflective of speculative activity.
  3. Overvaluation in the level of house prices, which indicates that house price levels are not fully supported by fundamental drivers such as income, mortgage rates and population.
  4. Overbuilding of the housing market, when the rental market vacancy rate and/or the inventory of newly built housing units that are unsold is elevated.

Each of these factors is measured using one or more indicators of housing demand, supply and/or price conditions.

Table 1: Comparisons between the April 2016 and July 2016 reports
  Overheating Price Acceleration Overvaluation Overbuilding Overall Assessment
  Apr. 2016 July 2016 Apr. 2016 July 2016 Apr. 2016 July 2016 Apr. 2016 July 2016 Apr. 2016 July 2016
Canada Weak Weak Weak Weak Moderate Strong Weak Weak Weak Moderate
Victoria Weak Moderate Weak Weak Weak Weak Weak Weak Weak Weak
Vancouver Weak Moderate Weak Moderate Strong Strong Weak Weak Moderate Strong
Edmonton Weak Weak Weak Weak Moderate Moderate Weak Weak Moderate Moderate
Calgary Weak Weak Weak Weak Moderate Moderate Moderate Moderate Strong Strong
Saskatoon Weak Weak Weak Weak Strong Strong Strong Strong Strong Strong
Regina Weak Weak Weak Weak Moderate Moderate Strong Strong Strong Strong
Winnipeg Weak Weak Weak Weak Weak Weak Moderate Moderate Moderate Moderate
Hamilton Moderate Moderate Weak Weak Moderate Strong Weak Weak Weak Moderate
Toronto Weak Weak Moderate Moderate Strong Strong Weak Weak Strong Strong
Ottawa Weak Weak Weak Weak Weak Weak Moderate Moderate Moderate Weak
Montréal Weak Weak Weak Weak Moderate Moderate Weak Weak Moderate Moderate
Québec Weak Weak Weak Weak Strong Strong Weak Weak Moderate Moderate
Moncton Weak Weak Weak Weak Weak Weak Moderate Moderate Weak Weak
Halifax Weak Weak Weak Weak Weak Weak Weak Weak Weak Weak
St. John’s Weak Weak Weak Weak Weak Weak Moderate Moderate Weak Weak
Evidence of problematic conditions
Weak Moderate Strong

Note 1: Colour codes indicate the level of evidence of problematic conditions: The HMA reflects a comprehensive framework that not only tests for the presence or incidence of signals of potentially problematic conditions, but also considers the intensity of signals (that is, how far the indicator is from its historical average) and the persistence of signals over time. Generally, low intensity and persistence are associated with a lower potential of upcoming problematic conditions. As the number of persistent signals increases, the evidence of a problematic condition developing increases.

Note 2: Results at the CMA level are not segmented by housing type or neighbourhood. They represent an assessment of the entire CMA. However, specific CMA reports provide further detailed analysis of these markets.

Note 3: The colour scale extends to red only for those factors that have multiple indicators signaling significant incidence, intensity and persistence of potentially problematic conditions. As a result, only overvaluation and overbuilding can receive a red rating, since they are assessed using more than one indicator.

Note 4: To ensure the framework is as current as possible, on a regular basis, we undertake a model selection process whereby our house price models for overvaluation are tested for statistical significance at the national and CMA level. The result of this process may change the number of indicators of a problematic condition from the previous assessment.

 

Canada

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