Canada’s federal housing agency says strong evidence of problematic conditions continues to exist in the national real estate market.
Canada Mortgage and Housing Corporation says the most prevalent issues it has observed in the 15 markets it monitors are overbuilding and overvaluation, which occurs when house prices outpace economic fundamentals such as income and population growth.
CMHC first raised its overall risk rating for the national housing market to strong last October.
It said there is strong evidence of problematic conditions in Vancouver, Victoria, Saskatoon, Regina, Toronto and Hamilton.
Edmonton, Calgary, Winnipeg, Montreal and Quebec City show moderate evidence of such conditions, the agency said.
CMHC’s housing market assessment is intended to be an early warning system to alert Canadians about problematic conditions developing in the country’s real estate markets.
`Price acceleration in Vancouver, Victoria, Toronto and Hamilton indicates that home price growth may be driven by speculation as it is outpacing what economic fundamentals like migration, employment and income can support,” CMHC’s chief economist Bob Dugan said in a news release.
“For this reason, homebuyers should ensure that their purchases are aligned with their needs as well as the long-term market outlook.”
The Canadian Press
it is also noted that skyrocketing single-family home prices in the GTA are encouraging buyers to purchase outside the city, according to CMHC’s latest Housing Markets Insight Report, released Tuesday.
“Our evidence supports that increasing single-family home prices in the GTA are persuading buyers to make purchases in nearby communities like Hamilton, Barrie and Guelph where homes are more affordable than within the city,” Jean-Sébastien Michel, principal, Market Analysis Centre, at Canada Mortgage and Housing Corporation, said. “In turn, this is driving up house prices in these neighbouring markets.”
That effect has been felt in Hamilton, Barrie and Guelph over the past few years. More recently, however, more far-flung markets are also seeing the effect.
Especially in St. Catherines-Niagara, according to CMHC.
“Except for the clear but short decline in many centres in 2008, house prices have steadily increased in most Ontario CMAs over the past twenty years, with even higher growth rates in the last five years,” CMHC said. “Overall, this substantial increase was due mainly to favourable economic conditions, population growth and relatively low mortgage rates, which increased demand for housing and drove up prices.”