The Housing Market Assessment (HMA), published quarterly, analyzes the housing market and gives a comprehensive view of its vulnerabilities. The HMA considers 4 main factors: overheating, price acceleration, overvaluation and overbuilding. The information and analysis provided can help Canadians make more informed decisions and contribute to an orderly adjustment of housing market imbalances.

Highlights from the national HMA for the third quarter of 2018

  • The HMA indicates a high degree of overall vulnerability at the national level for the 10th straight quarter.
  • Despite improved alignment between house prices and housing market fundamentals in the previous quarter, the HMA continues to detect moderate evidence of overvaluation for Canada as a whole.
  • The degree of overall vulnerability remains high for Victoria, Vancouver, Hamilton and Toronto. The HMA continues to detect overvaluation in these centres, but house prices are moving closer to levels supported by market fundamentals. Most notably, the evidence of overvaluation has moved from high to moderate in Victoria and Toronto.
  • Calgary, Edmonton, Saskatoon, Regina and Winnipeg continue to see a moderate degree of vulnerability in the overall assessment. However, in Calgary, Edmonton and Saskatoon, evidence of overbuilding has eased from high to moderate.
  • A low degree of overall vulnerability is sustained for Ottawa, Montréal, Québec City, Moncton, Halifax and St. John’s. We continue to closely monitor Montréal’s resale market because of significant upward pressure on house prices.

Overvaluation still moderate despite falling house prices

From the third quarter of 2017 to the third quarter of 2018, the inflation-adjusted MLS® average price dropped by 2.3%. Meanwhile, the young-adult population grew by 2.1%, which increased the number of potential first-time homebuyers. Together, but without considering other factors, lower house prices and strong growth in the number of potential first-time homebuyers would have lowered the overvaluation gap.

However, these factors were more than offset by a 0.8% drop in inflation-adjusted personal disposable income over the same period. As a result, we have kept the rating of overvaluation at the national level at “moderate.”

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Date Published: February 7, 2019