Toronto and Hamilton Housing Market Vulnerability Ratings Drop from High to Moderate

Ottawa, November 7, 2019

Toronto and Hamilton are the latest markets to see a change in their overall degree of vulnerability from high to moderate, according to the most recent Canada Mortgage and Housing Corporation (CMHC) Housing Market Assessment (HMA) released today. The change brings the Toronto and Hamilton markets in line with Canada’s overall moderate vulnerability rating. Victoria remains the only major centre with an overall high degree of vulnerability rating.

The national housing market’s overall vulnerability remains moderate for the third consecutive quarter. This follows 10 consecutive quarters of having been flagged with a high degree of vulnerability. Imbalances between house prices and housing market fundamentals such as income and population have narrowed with prices continuing to adjust and fundamentals catching up.

Highlights:

Toronto and Hamilton have seen the degree of overall housing market vulnerability decrease from high to moderate. This reduced vulnerability results from an easing in the overvaluation rating from moderate to low as house prices continued to evolve more in line with housing market fundamentals like personal disposable income, population and interest rates.

Victoria no longer exhibits evidence of overheating. However, a high degree of overall vulnerability is maintained as evidence of price acceleration and overvaluation, while easing, is still signaled.

Vancouver’s overall vulnerability remains moderate as evidence of overvaluation persists. However, lower home prices in different segments of the resale market and growth in economic and demographic fundamentals have narrowed the imbalances.

Edmonton, Calgary, Saskatoon, Regina and Winnipeg continue to see a moderate degree of vulnerability in the overall assessment, due to evidence of overbuilding.

Ottawa, Montréal, Québec City, Moncton, Halifax and St. John’s maintain a low degree of overall vulnerability. However, overheating conditions persist in Montréal and Moncton due to significant tightening between supply and demand.

Assessments for Canada and all 15 CMAs are available in the graph located in the release backgrounder.

On a quarterly basis, CMHC issues the HMA to provide Canadians with expert and impartial insight and analysis, based on the best data available in Canada. This report provides a comprehensive view of housing market vulnerabilities and identifies imbalances. The HMA framework is not intended to identify long-term challenges related to housing affordability.

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

Results are based on data as of the end of June 2019 (the annual rental apartment vacancy rates are from October 2018) and market intelligence up to the end of September 2019. This national report provides the housing market assessment at the national level and summary assessment results for 15 Census Metropolitan Areas (CMAs). For each of these CMAs, CMHC also issues a local report with more information and analysis.

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 all levels of governments, consumers and the housing industry.

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Quote:

“Although moderate evidence of overvaluation is still signaled at the national level, the imbalances between home prices and housing market fundamentals are easing”. In the second quarter of 2019, the inflation-adjusted MLS® average price in Canada declined for a sixth consecutive quarter on a year-over-year basis, while fundamentals such as the pool of potential homebuyers is steadily growing, increasing housing demand.”
— Bob Dugan, Chief Economist with CMHC

Information on this release:

Angelina Ritacco
CMHC Media Relations
416-218-3320
aritacco@cmhc-schl.gc.ca

Backgrounder:

The HMA takes into account demographic, economic and financial determinants of the housing market such as population, personal disposable income, and interest rates to detect vulnerability. The framework also takes into account recent developments in both resale and residential construction markets.

The HMA was developed on the basis of its ability to detect vulnerable housing market conditions in historical data, such as the house price bubble Toronto experienced in the late 1980s and early 1990s. The ability of the HMA to detect vulnerabilities relies on the assumption that historical relationships between prices and fundamental drivers of housing markets have not changed.

**Comparisons between the August 2019 and November 2019 reports**
	Overheating		Price Acceleration		Overvaluation		Overbuilding		Overall Assessment
	Aug. 2019	Nov. 2019	Aug. 2019	Nov. 2019	Aug. 2019	Nov. 2019	Aug. 2019	Nov. 2019	Aug. 2019	Nov. 2019
Canada	Low	Low	Low	Low	Moderate	Moderate	Low	Low	Moderate	Moderate
Victoria	Moderate	Low	Moderate	Moderate	Moderate	Moderate	Low	Low	High	High
Vancouver	Low	Low	Low	Low	Moderate	Moderate	Low	Low	Moderate	Moderate
Edmonton	Low	Low	Low	Low	Low	Low	Moderate	Moderate	Moderate	Moderate
Calgary	Low	Low	Low	Low	Low	Low	Moderate	Moderate	Moderate	Moderate
Saskatoon	Low	Low	Low	Low	Low	Low	Moderate	Moderate	Moderate	Moderate
Regina	Low	Low	Low	Low	Low	Low	High	High	Moderate	Moderate
Winnipeg	Low	Low	Low	Low	Moderate	Moderate	Moderate	Moderate	Moderate	Moderate
Hamilton	Moderate	Moderate	Moderate	Moderate	Moderate	Low	Low	Low	High	Moderate
Toronto	Moderate	Moderate	Moderate	Moderate	Moderate	Low	Low	Low	High	Moderate
Ottawa	Low	Low	Low	Low	Low	Low	Low	Low	Low	Low
Montréal	Moderate	Moderate	Low	Low	Low	Low	Low	Low	Low	Low
Québec	Low	Low	Low	Low	Low	Low	Low	Low	Low	Low
Moncton	Moderate	Moderate	Low	Low	Low	Low	Low	Low	Low	Low
Halifax	Low	Low	Low	Low	Low	Low	Low	Low	Low	Low
St. John’s	Low	Low	Low	Low	Low	Low	Moderate	Moderate	Low	Low

Degree of vulnerability
	Low		Moderate		High

Note 1: Colour codes indicate the degree of market vulnerability. The HMA is a comprehensive framework that considers both the intensity (magnitude) and the persistence of signals of imbalances. Generally, low intensity and persistence are associated with low evidence of vulnerability. As the number of intense and persistent signals increases, the associated degree of vulnerability becomes higher.

Note 2: Overheating and price acceleration are each assessed with a single indicator. Colour scales for these factors vary between green and yellow only. Overvaluation and overbuilding are assessed with multiple indicators. Their colour scales, as well as the colour scale for the overall assessment, change among green, yellow and red to reflect different degrees of imbalances.