OTTAWA, July 26, 2017 — Slow growth in the young adult population coupled with a decrease in disposable income and a pickup in home price growth means Canada Mortgage and Housing Corporation (CMHC) will maintain its assessment of “strong evidence of problematic conditions” in Canada’s housing market.
On a quarterly basis, CMHC issues its Housing Market Assessment (HMA) to provide Canadians with both expert and impartial insight and analysis, based on the best data available in Canada. This report acts as an “early warning system” for the country’s housing markets — an important tool supporting financial and housing market stability.
- Overall rating continues to be “strong evidence of problematic conditions”.
- Evidence of overvaluation at the national level remains moderate and strong evidence is seen in Toronto, Vancouver, Hamilton and Victoria.
- Evidence of overbuilding has increased from six centers to seven as Quebec’s rating increases to moderate due to a high number of rental apartment starts outpacing demand.
- The Vancouver market is now showing moderate evidence of overheating due to townhomes and apartments seeing high demand leading to multiple-offer situations and higher prices.
- Markets in the Prairies continue to show moderate to strong evidence of overbuilding.
CMHC defines “problematic conditions” as imbalances in the housing market. Imbalances occur when overbuilding, overvaluation, overheating and price acceleration - or combinations thereof - depart significantly from historical averages. For examples, please consult the Overview section of the national report.
The complete HMA, including national, regional and CMA insight and analysis, is available on our website.
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As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need, and offers objective housing research and information to Canadian governments, consumers and the housing industry.
“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.”
“Townhomes and apartments, which typically sell for less than single-detached homes, were in high demand for first-time buyers and families. This led to multiple-offer situations, increasing prices and moderate evidence of overheating for Vancouver. The market continues to see moderate price acceleration and overvaluation due to low supply, despite record level construction.”
“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.”
Information on this release:
CMHC media content available for this news release:
- Aled ab Iorwerth Video Clip — English (11.752 MB)
- Bob Dugan Headshot (4.109 MB)
- Eric Bond Headshot (0.584 MB)
- Dana Senagama Headshot (12.709 MB)
CMHC’s HMA analytical framework is designed to evaluate the extent to which there is evidence of problematic conditions in Canadian housing markets. The framework assesses housing market conditions and considers the incidence, intensity and persistence of four main factors:
- Overheating of demand in the housing market, wherein sales significantly outpace new listings.
- Acceleration in house prices, which could be partially reflective of speculative activity.
- Overvaluation in the level of house prices, which indicates that house price levels are not fully supported by fundamental drivers such as income, mortgage rates and population.
- Overbuilding of the housing market, when the rental market vacancy rate and/or the inventory of newly built housing units that are unsold is elevated.
Each of these factors is measured using one or more indicators of housing demand, supply and/or price conditions. Table 1 outlines the results from the previous release in April 2017 and the current July 2017 release.
|Overheating||Price Acceleration||Overvaluation||Overbuilding||Overall Assessment|
|Apr. 2017||Jul. 2017||Apr. 2017||Jul. 2017||Apr. 2017||Jul. 2017||Apr. 2017||Jul. 2017||Apr. 2017||Jul. 2017|
Note 1: Colour codes indicate the level of evidence of problematic conditions: The HMA reflects a comprehensive framework that not only tests for the presence or incidence of signals of potentially problematic conditions, but also considers the intensity of signals (that is, how far the indicator is from its historical average) and the persistence of signals over time. Generally, low intensity and persistence are associated with a lower potential of upcoming problematic conditions. As the number of persistent signals increases, the evidence of a problematic condition developing increases.
Note 2: Results at the CMA level are not segmented by housing type or neighbourhood. They represent an assessment of the entire CMA. However, specific CMA reports provide further detailed analysis of these markets.
Note 3: The colour scale extends to red only for those factors that have multiple indicators signaling significant incidence, intensity and persistence of potentially problematic conditions. As a result, only overvaluation and overbuilding can receive a red rating, since they are assessed using more than one indicator.
Note 4: To ensure the framework is as current as possible, on a regular basis, we undertake a model selection process whereby our house price models for overvaluation are tested for statistical significance at the national and CMA level. The result of this process may change the number of indicators of a problematic condition from the previous assessment.