If you think you're overheating in this summer weather, consider Victoria real estate for a moment.
The housing market in the Victoria Census Metropolitan Area (CMA) has been assessed as at a “high degree of vulnerability” from various risk factors by the Canada Mortgage and Housing Corporation (CMHC), in a report released July 26.
The federal housing agency issues a quarterly Housing Market Assessment, which this edition assessed market activity in 2018’s first quarter.
As in previous editions, the latest report said that the main risk comes from overvaluation of homes, with price levels “far higher than the upper predicted values from price models based on demand and supply fundamental factors such as population, income, financing costs, and land supply.”
Braden Batch, senior economics analyst at CMHC, said, “A high degree of vulnerability was detected for the Metro Victoria housing market. A rapid decline in sales has allowed a modest build-up of inventory, dampening price growth. Inventory growth has been dominated by single-detached housing units at the higher end of the market. At the same time, overvaluation remains a concern largely driven by affordability.”
The quarterly Housing Market Analysis analyzes real estate markets across Canada, assessing a combination of four key risk factors: overheating, when demand for homes in the region outpaces supply; sustained acceleration in house prices; overvaluation of house prices in comparison with levels that can be supported by economic fundamentals; and overbuilding, when the inventory of available homes exceeds demand.
Despite home price growth slowing recently in many areas, the overall year-over-year price growth seen in 2018’s first quarter was enough for CMHC to flag the capital region as being at “moderate” risk of both overheating and price acceleration.
The report said, “Overheating has subsided, but not enough to remove the warning.”
Once again, the only area where the risk was deemed low in Victoria CMA was overbuilding. “Metro Victoria was found to have low supply rather than overbuilding,” said the report. However, it added, “Since current condo construction remains elevated, inventory could begin to rise rapidly if the absorption share continues to decline.”
National picture
Despite Canada as a whole being assessed as at “moderate risk” in price acceleration and overvaluation, and at “low risk” in overheating and overbuilding, the CMHC still said that overall the country’s housing market is at “high risk” for the eighth consecutive quarter. The national report said that this was “due to price acceleration and overvaluation being detected” in key housing markets.
Vancouver Census Metropolitan Area (CMA) was also assessed as at high risk overall, with the same ratings in each of the four factors as Metro Vancouver, as was Toronto CMA.
CMHC said that the report “acts as an ‘early warning system’ for the country’s housing markets – an important tool supporting financial and housing market stability.”
