Home price growth slowing, but Toronto still at risk of price acceleration Image

Home price growth slowing, but Toronto still at risk of price acceleration

By Newinhomes on Jul 27, 2018

The Canada Mortgage and Housing Corporation released its quarterly Housing Market Assessment, reporting that the country’s housing market is highly vulnerable for the eighth consecutive quarter.

The HMA is based on data as of the end of March 2018 and market intelligence up to the end of June 2018. It was discovered that there remains strong evidence of overvaluation and price acceleration in major census metropolitan areas across Canada.

“At the national level a high degree of vulnerability continues due to moderate levels of price acceleration and overvaluation. Regionally, we are seeing a fair amount of differences, for instance in major centres in Ontario and British Columbia a high degree of vulnerability remains while in the Prairie and Atlantic markets range from moderate to low,” says Bob Dugan, Chief Economist, CMHC.

In Toronto, price growth is slowing, but CMHC would like to see housing prices moderating for a longer period of time before saying the market is safe from price acceleration.

Home prices

Altus Group and the Building Industry and Land Development Association recently released its new home statistics for the Greater Toronto Area, and price growth varies depending on what segment you’re referring to.

The average price of a new single-family home fell more than 9% year-over-year to just over $1.1 million, while the average price for a new condo soared more than 23% to over $770,000. So, we could say price growth is slowing, but the new condo market is still hot.

Overvaluation decreased on average in Hamilton, but housing prices are still high compared to demand fundamentals. CMHC says population growth is a key driver in the demand for housing in Hamilton.

“Policy changes to the housing market over the past 12 months have dampened homebuying demand and softened price growth. However, our assessment continues to indicate a high degree of vulnerability in the Toronto CMA housing market as price growth persists above rates justified by economic and demographic fundamentals such as income and population,” says Dana Senagama, Manager, Market Analysis, Ontario, CMHC.

CMHC definitions of problematic conditions:

Overheating: Sales outpacing listings

Overbuilding: When vacancy rate or unsold inventory increases

Price Acceleration: Partially reflective of speculative activity

Overvaluation: Prices not supported by fundamental drivers, including income, mortgage rates, and population

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