Greater Victoria housing market ‘vulnerable’: CMHC

For the second consecutive fiscal quarter, Victoria has bucked a national trend when it comes to the vulnerability of its housing market, according to a new report from the Canada Mortgage and Housing Corporation.

Evidence of overvaluation and price acceleration led the federal housing agency’s quarterly market assessment to label Victoria’s housing market highly vulnerable.

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Pershing Sun, the CMHC’s senior economics analyst, said the market is moving toward balanced territory but, as in the fourth quarter of last year, there remains evidence of overvaluation and price acceleration.

The CMHC takes four components — overheating, price acceleration, overvaluation and overbuilding — to determine an overall assessment.

With two of the components hitting moderate levels, Victoria is deemed to have a high risk overall, even though the imbalance in those categories is easing.

Overvaluation is determined by looking at house prices compared with personal income, population, interest rates and other fundamentals, while price acceleration is a sustained increase in the growth rate of prices over a given period.

According to Sun, Victoria was deemed to have a low degree of vulnerability in terms of overheating — when housing demand outpaces supply — and overbuilding, which occurs when the supply of housing significantly exceeds demand.

Sun said multiple segments of Victoria’s market continue to stabilize and are trending toward balanced conditions, especially in multi-family developments.

But it’s not there yet.

Victoria was the only Canadian market to hold on to the same rating CMHC handed out in the final quarter of 2019.

The housing agency downgraded the vulnerability of several cities across the country with its latest report.

Vulnerability ratings on Edmonton, Calgary, Saskatoon and Winnipeg were downgraded to low as indications of overbuilding eased, while Regina remains at moderate on overbuilding concerns.

Vancouver overvaluation remains moderate, while Ottawa, Montreal, Quebec City, Moncton, Halifax and St. John’s are rated at low vulnerability overall.

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