Canada still showing signs of heightened vulnerability as overvaluation and price acceleration factors remain

Multimedia content available

OTTAWA, January 30, 2018 — While improving conditions were noted in both Winnipeg and Saskatoon, Canada’s housing markets remain highly vulnerable overall for the sixth consecutive quarter with evidence of overvaluation and price acceleration, according to Canada Mortgage and Housing Corporation (CMHC).

On a quarterly basis, CMHC issues its Housing Market Assessment (HMA) to provide Canadians with both expert and impartial insight and analysis, based on the best data available in Canada. This report acts as an “early warning system” for the country’s housing markets – an important tool supporting financial and housing market stability.

Results are based on data as of the end of September 2017 and market intelligence as of the end of December 2017.

CMHC’s HMA continues to find housing markets in Toronto, Hamilton, Vancouver and Victoria highly vulnerable due to price acceleration and overvaluation. There is low evidence of overbuilding overall at the national level but there are concerns surrounding overbuilding in Calgary, Edmonton, Saskatoon and Regina. In these markets, the inventory of new but unsold homes and rental vacancy rates remain high. Low vulnerability is detected for housing markets in Manitoba, Québec and the Atlantic.


Foreground: Bob Dugan, Chief Economist, CMHC

Background: Building C Hallway, NHS cubes

Bob Dugan: “Our market assessment continues to show a high degree of vulnerability for the housing market at the overall national level because of the combination of price acceleration and overvaluation. Regional disparities remained, especially in terms of overvaluation, as some centres in BC and Ontario were still highly overvalued, leading to an overall assessment of a high degree of vulnerability.”


Report highlights:

  • Overvaluation at the national level remains moderate, but strong evidence of overvaluation continues to be seen in Toronto, Vancouver, Hamilton, and Victoria.
  • Despite the recent price adjustments, the ratings of high degrees of vulnerability were maintained in Toronto and Hamilton. House prices are not fully supported by economic fundamentals such as personal disposable income and population growth.
  • Vancouver’s housing market remained highly vulnerable. Overheating continues to be detected, as demand for multi-family units remains elevated, largely due to their relative affordability compared to single-detached homes. Inventories of both new and resale multi-family units are near all-time lows.
  • Victoria’s overvaluation persisted with low inventory levels of new and resale homes.
  • House prices in Calgary, Edmonton, Saskatoon and Regina appear broadly in line with fundamentals, but strong evidence of overbuilding is still observable. Both inventories of completed and unsold homes and rental vacancy rates are above the thresholds of overbuilding.
  • Manitoba, Québec and Atlantic Canada housing markets were rated as showing low vulnerability.

CMHC defines vulnerability as imbalances in the housing market. Imbalances occur when overbuilding, overvaluation, overheating and price acceleration - or combinations thereof - depart significantly from historical averages.

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.

For more information follow us on Twitter, YouTube, LinkedIn and Facebook.

“Our market assessment continues to show a high degree of vulnerability for the housing market at the overall national level because of the combination of price acceleration and overvaluation. Regional disparities remained, especially in terms of overvaluation, as some centres in BC and Ontario were still highly overvalued leading to an overall assessment of a high degree of vulnerability.”

— Bob Dugan, Chief Economist

“While house price growth has slowed, house price levels remained high relative to underlying economic fundamentals such as income and population growth. Therefore, we continue to find strong evidence of overvaluation”

— Dana Senagama, Principal Market Analyst (Toronto)

Information on this release

Angelina Ritacco
CMHC Media Relations

Additional data is available upon request.

CMHC media content available for this news release:

  • Bob Dugan Video Clip — English (24.114 MB)
  • Bob Dugan Headshot (4.096 MB)

Download this Media Package (ZIP — 28.209 MB)


CMHC’s HMA analytical framework is designed to evaluate the extent to which there are vulnerabilities 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. The table below outlines the results from the previous release in October 2017 and the current January 2018 release.

Comparisons between the October 2017 and January 2018 reports
 OverheatingPrice AccelerationOvervaluationOverbuildingOverall Assessment
 Oct. 2017Jan. 2018Oct. 2017Jan. 2018Oct. 2017Jan. 2018Oct. 2017Jan. 2018Oct. 2017Jan. 2018
St. John’sWeakWeakWeakWeakWeakWeakModerateModerateWeakWeak
Degree of vulnerability

Note 1: Colour codes indicate the degree of market vulnerability. The HMA reflects a comprehensive framework that not only tests for the presence or incidence of signals of imbalances (that is, how far the indicator is from its historical average), but also considers the intensity and the persistence of these signals over time. Generally, low intensity and persistence are associated with a lower vulnerability. As the number of persistent signals increases, the evidence of an imbalance 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 that can identify imbalances. 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 showing vulnerability from the previous assessment




Print(opens in a new window)