Greater Victoria’s housing market is overvalued, Canada Mortgage and Housing Corp. says in its latest quarterly market assessment.
The capital region is among Canadian housing markets showing what the federal agency calls strong evidence of “problematic conditions.” It also singled out Vancouver, Saskatoon, Regina, Toronto, and Hamilton.
Rising prices in those markets “indicates that home-price growth may be driven by speculation as it is outpacing what economic fundamentals like migration, employment and income can support,” CMHC’s chief economist Bob Dugan said Thursday.
“For this reason, homebuyers should ensure that their purchases are aligned with their needs as well as the long-term market outlook.”
Demand for housing in the capital region remained high in the third quarter of last year, the federal agency said.
Its assessment found “moderate evidence of overheating, price accelerations, and overvaluation in Greater Victoria.
“The supply of existing houses for sale is limited, with active listings at their lowest point since 2003, a time when price growth was similarly strong.”
CMHC described the increase in new listings as “muted.”
At the end of December, there were just 1,493 properties listed for sale through the Victoria Real Estate Board’s Multiple Listing Service. That’s down by 41 per cent when it was 2,517 at the end of 2015.
Listings dried up as 2016 hit a record number of property sales, reaching 10,622.
Even as capital region third-quarter sales dropped from the number of sales in the second quarter, the average price continued to climb, CMHC said.
“Since demand fundamentals were not enough to support the rate of price growth that occurred, the HMA [housing market assessment] framework detected overvaluation.”
By year’s end, the benchmark value for a single family house in the core of Victoria was $758,500, an increase of 24 per cent year-over-year.
Looking at Canada’s housing market as a whole, the federal agency said it found “strong evidence” of problematic conditions due to a combination of overvalued properties and price acceleration. “Home prices have climbed to levels exceeding those economic fundamentals that underpin the housing market.”
This was the second consecutive quarter that the CMHC pegged Canada’s housing market, based on reviews of 15 markets, as having problematic market conditions.
“This assessment largely accounts for market conditions in Vancouver and Toronto where strong price growth has been spreading to neighbouring centres such as Hamilton and Victoria.”
CMHC issues these market assessments, calling them an early warning system to alerting Canadians to areas of concern developing in our housing markets.
As the capital region housing prices rise, many buyers are turning to condominiums. At the same time, Victoria’s rental vacancy rate continues to tighten, reaching 0.5 per cent in November, according to CMHC. New rental apartments are being built to meet that continuing strong demand.
The total number of multi-family units under construction, as of Dec. 31, in the capital region was 3,533, Yellow Sheet Construction Data Ltd. said in a recent report.
Another 4,974 units are in the rezoning or development permit stage, it said.