Victoria housing market at low risk of overheating, CMHC says

Greater Victoria’s housing market is at the lowest risk of being overvalued among 15 Canadian cities studied by the federal housing agency.

A growing number of Canadian housing markets are overvalued, Canada Mortgage and Housing Corp. says in a report released Thursday. It identified 11 markets with evidence of overvaluation.

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Greater Victoria is rated as having the lowest amount of overvaluation risk among the markets examined. CMHC also looked at potential for problems with overheated demand, which occurs when demand significantly outstrips supply, price acceleration and over-building. The risk of any of these concerns is seen as “weak” in the capital region, CMHC said.

The pace of existing-home sales in the capital region trended higher in the second quarter of 2015, particularly for single-family houses, the report said. But the supply of a wide range of housing types continues to provide choice for home buyers at all price points.

“Home price growth has been moderate so far in 2015 and is being supported by population growth,” CMHC said.

“Demand for new homes has been well-matched by builders, and both the number of units under construction and the inventory of completed and unsold units are within historical norms.”

Markets deemed to be showing evidence of overvaluation are: Vancouver, Calgary, Edmonton, Saskatoon, Regina, Winnipeg, Toronto, Ottawa, Montreal, Quebec City and Halifax.

The 11 markets with evidence of overvaluation is up from the eight markets in CMHC’s last quarterly report in August. In some markets, notably Toronto and Vancouver, overvaluation reflects the fact that home prices have been climbing rapidly, said CMHC chief economist Bob Dugan.

In others, such as the oil-price dependent markets of Regina, Saskatoon and Calgary, it’s because underlying economic and demographic factors needed to sustain home prices — such as personal disposable incomes and population growth — have deteriorated.

“In places like Regina, we still detect overvaluation in that centre, but we’ve actually seen buyers’ market conditions … and some softening of prices,” Dugan said during a conference call.

CMHC’s housing market assessment report aims to serve as an early warning signal by identifying problematic conditions that, if left unchecked, could lead to a correction in home prices.

CMHC says it has found strong evidence of problematic conditions in Toronto, Winnipeg, Saskatoon and Regina. All four of those markets show signs of overvaluation, according to the agency, and in Toronto, price acceleration is also evident.

Winnipeg, Saskatoon and Regina show signs that the supply of homes is outpacing demand, in addition to being overvalued.

Vancouver, one of the country’s priciest real estate markets, has not been listed among the high-risk markets, although CMHC says it is now detecting “moderate” evidence of overvaluation.

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