The Canada Mortgage and Housing Corporation (CMHC) says there is evidence to suggest the housing market in Canada is in trouble. CMHC released its latest assessment of the market, and says the outlook is gloomy, despite a recent drop in property prices in the Greater Toronto Area.
Houses continue to appreciate at an alarming rate and properties are being overvalued, presenting the two biggest risk to the housing market. In the CMHC report, the organization says a third of cities it studied show evidence of conditions that will damage the market. Victoria, Vancouver, Toronto and Hamilton are named as problematic cities, with overvaluation the biggest concern.
While those locations will not surprise many, Saskatoon may. However, overbuilding in a suffering economy has made the city unstable in the housing market.
“We’ve maintained Canada’s overall rating at strong evidence of problematic conditions as we continue to see moderate overvaluation and price acceleration. In the first quarter of this year, Canada saw a positive, yet slow growth in the young adult population and a drop in disposable income in all regions except British Columbia. This gives less support to house prices, which picked up again in early 2017 after a period of decline in the back half of 2016.” — Bob Dugan, Chief Economist, Canada Mortgage and Housing Corporation
There have been active programs in Toronto and Hamilton to cool housing prices, and while improvements have been made, CMHC did not change its assessment compared to last quarter.
“We continue to see strong evidence of problematic conditions in Toronto’s housing market. Economic fundamentals like income and population growth cannot fully explain the rapid growth in house prices in Toronto.” — Dana Senagama, Principal Market Analyst (Toronto)