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After three years of high vulnerability, Vancouver now shows evidence of moderate vulnerability while Canada continues to exhibit a moderate degree of vulnerability, according to the most recentCanada Mortgage and Housing Corporation (CMHC) Housing Market Assessment (HMA) released today.
After ten straight quarters with a high degree of vulnerability in Canada, this is the second consecutive quarter with a moderate rating as overvaluation continues. Imbalances between house prices and housing market fundamentals such as income and population have narrowed with prices continuing to adjust and fundamentals catching up.
Key Highlights:
- Vancouver’s housing market rating has changed to moderate after being assessed at a high degree of overall vulnerability for the past three years. Evidence of price acceleration has eased to low.
- Toronto, Hamilton and Victoria maintain a high degree of overall vulnerability. However, conditions of overheating, price acceleration and overvaluation are showing signs of easing in all three centres.
- Edmonton, Calgary, Saskatoon, Regina and Winnipeg continue to see a moderate degree of vulnerability in the overall assessment, due to 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, as does overbuilding in St. John’s.
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 overbuilding, overvaluation, overheating and price acceleration - or combinations thereof - depart significantly from historical averages.
Results are based on data as of the end of March 2019 (the annual rental apartment vacancy rates are from October 2018) and market intelligence up to the end of June 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 Canadian governments, consumers and the housing industry.
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Quotes:
“For the second consecutive quarter, moderate evidence of overvaluation continues to be the only sign of vulnerability for Canada as a whole. Imbalances between house prices and housing market fundamentals have narrowed with declining home prices in the resale market and a growing pool of potential first-time homebuyers. This dynamic contributes to closing the overvaluation gap.”
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.
| Overheating | Price Acceleration | Overvaluation | Overbuilding | Overall Assessment | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| May 2019 | Aug 2019 | May 2019 | Aug 2019 | May 2019 | Aug 2019 | May 2019 | Aug 2019 | May 2019 | Aug 2019 | |
| Canada | Low | Low | Low | Low | Moderate | Moderate | Low | Low | Moderate | Moderate |
| Victoria | Moderate | Moderate | Moderate | Moderate | Moderate | Moderate | Low | Low | High | High |
| Vancouver | Low | Low | Moderate | Low | Moderate | Moderate | Low | Low | High | 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 | Moderate | Low | Low | High | High |
| Toronto | Moderate | Moderate | Moderate | Moderate | Moderate | Moderate | Low | Low | High | High |
| 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 |
| Low | Moderate | High |
Note 1: Colour codes indicate the degree of market vulnerability. Price acceleration and overheating are measured by single indicators. Colour scales for these factors vary between green and yellow. Overvaluation and overbuilding are measured by 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.
Note 2: The HMA detects the presence or incidence of market imbalances when indictors are above thresholds. It also measures the intensity of signals by how much indicators are above thresholds, and the persistence of signals by how long signals stand above thresholds. Generally, low intensity and persistence are associated with a lower vulnerability. As the number of persistent signals increases, the evidence of imbalances increases.
