The markets investors may want to avoid

Not every market is as hot as Vancouver and Toronto and these once-hot metropolises may soon appear on every investor’s “do not buy” list.

Overbuilding problems plague various markets, which could lead to a downward pressure on prices.

“The evidence of overbuilding has increased since the previous assessment in Calgary, Saskatoon, Regina, and Ottawa due to either higher vacancy rates, high inventory of new and unsold units, or a combination of both,” Bob Dugan, CMHC’s Chief Economist said. “As more centres are now showing problematic overbuilding conditions, inventory management is becoming more important.”

The CMHC’s Q1 2016 Housing Market Assessment pointed to the overbuilding concerns as well as the impact low oil prices have had on Alberta and Saskatchewan. 

Those aren’t the only provinces the CMHC has concerns about, however.

“In Toronto, overall strong evidence of problematic conditions reflects a combination of price acceleration and overvaluation,” CMHC said in a release. “We are also monitoring for the potential emergence of overbuilding in Toronto due to the high number of condominium units under construction. Inventory management therefore continues to be necessary to make sure that these condominium units under construction do not remain unsold upon completion.”

On a somewhat brighter note, the Crown Corporation did identify one formerly struggling market that has started to recover.

“In Winnipeg, the evidence of problematic conditions has been lowered from strong to moderate,” CMHC said. “This is due to the evidence of overvaluation being reduced with improving economic and demographic fundamentals.”

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