Housing market vulnerability has reduced in several Canadian cities

by Steve Randall21 Feb 2020

Several housing markets in Western Canada have seen vulnerability decrease while the national risk remains moderate.

CMHC says that risk ratings for Edmonton, Calgary, Saskatoon and Winnipeg have been downgraded from moderate to low in its Housing Market Assessment released Thursday.

The level of vulnerability on a national level remained moderate in February 2020 compared to November 2019; it’s the fourth consecutive quarter that vulnerability at this level.

The evidence of overvaluation remains moderate, with higher house prices in the third quarter of 2019 partly sustained by population growth and the decline in mortgage rates.

"We continue to see moderate evidence of overvaluation at the national level" said Bob Dugan, CMHC's chief economist. "The growth in inflation-adjusted prices in the third quarter of 2019 was slightly larger than the increase supported by the sustained population growth in Canada and the decline in the nominal mortgage rates."

Regional highlights

  • Victoria keeps a high overall degree of vulnerability as price acceleration and overvaluation imbalances are still signaled. However, home prices continue to stabilize and imbalances are easing.
  • In Vancouver, evidence of overvaluation remains moderate, as does the overall vulnerability rating.
  • In Edmonton and Calgary, evidence of overbuilding was still present as new home inventories remained high. The intensity and persistence of the overbuilding signals no longer sustain an overall moderate degree of vulnerability, which decreased to low in these two centres.
  • In Saskatoon the degree of vulnerability was lowered from moderate to low in the overall assessment as evidence of overbuilding eased from moderate to low.
  • Winnipeg's overall assessment moves to low vulnerability due to the easing evidence of overvaluation. Population growth and low mortgage rates increased the price levels supported by housing market fundamentals, while observed home prices continued to decline. Evidence of overvaluation has eased from moderate to low.
  • In Regina, overall vulnerability remains moderate as evidence of overbuilding remains high.
  • In Toronto and Hamilton overall housing market vulnerability remains moderate. Overheating and price acceleration are still signaled in both regions. However, evidence of overvaluation remains low as stronger price growth remains aligned with economic and demographic fundamentals, such as personal disposable income, population growth and interest rates.
  • Ottawa, Montréal, Québec City, Moncton, Halifax and St. John's maintained low overall vulnerability ratings. Evidence of overheating persist in the resale markets of Montréal and Moncton.

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