It looks like Canada’s housing market is finally balancing out, according to the latest Housing Market Assessment from the Canada Mortgage and Housing Corporation.
Up to the end of 2018, there were 10 straight quarters of Canada’s housing market being labelled highly vulnerable by the CMHC’s quarterly HMA. At the beginning of this year, the rating eased to moderate, and the second quarter also came in as moderate, with overvaluation being the only concern on a national level.
"For the second consecutive quarter, moderate evidence of overvaluation continues to be the only sign of vulnerability for Canada as a whole,” says Bob Dugan, Chief Economist, CMHC. “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."
Victoria, Hamilton and Toronto are the only major markets still highly vulnerable, mostly due to moderate risks of overheating, price acceleration, amd overvaluation. Though Toronto has 120 construction cranes active, the most in North America, the region is still not in danger of overbuilding. That shows how strong demand is to live in the Greater Toronto Area!
“Overheating, price acceleration and overvaluation continue to be flagged in Toronto,” reads the report. “However, the conditions of overvaluation continue to ease as house prices are more in line with housing market fundamentals.”
Vancouver finally dropped down to moderate risk thanks to slowing price acceleration. The low risk markets include Ottawa, Montreal, Quebec, Moncton, Halifax, and St. John’s. The only region in danger of overbuilding is Regina.
The government of Canada just launched a $100 million program to support first-time buyers, and there’s an even larger $1.25 billion program kicking in September 2, 2019. As more first-time buyers are able to enter the market across the country, and even in some of the most expensive markets, like Toronto and Vancouver, perhaps we’ll finally see the CMHC give the country a low vulnerability rating by 2020.
CMHC definitions of problematic conditions:
Sales outpacing listings
: When vacancy rate or unsold inventory increases
Partially reflective of speculative activity
: Prices not supported by fundamental drivers, including income, mortgage rates, and population