Victoria’s housing market is showing strong signs of big problems and being overvalued, according to a report by Canada Mortgage and Housing Corp.
The CMHC’s Housing Market Assessment noted Greater Victoria’s housing market’s rapid rise in prices is outstripping the economic and demographic fundamentals that would support it.
The report looks at four factors — overheating, acceleration in prices, overvaluation and overbuilding — to assess a market. It noted the resale market remains well out of balance, with strong sales and very low inventory levels, and no sign of increased supply coming.
“The last quarter of 2016 was dominated by strong sales and low supply, which pushed house prices beyond levels that are supported by fundamentals such as income and population growth,” said Eric Bond, CMHC senior market analyst. “For these reasons, we detected increased evidence of overvaluation in the Victoria market.”
The federal agency said sales have exceeded new listings for several months, which has led to a decline in active listings to a 30-year low and has driven the over-heating of the market.
The price increases that have resulted put Victoria into over-valued territory, said the report.
“While local economic and demographic fundamentals have been supportive of rising home prices, prices have risen too fast to be supported by fundamentals alone,” the report said.
CMHC said overvaluation — which occurs when house prices are not supported by economic fundamentals such as incomes — was found to be strong in Victoria, Vancouver, Toronto and Hamilton. Moderate overvaluation was found in Saskatoon and Quebec City.
