CMHC 2016-Q1 housing report spots problematic overvaluation and overbuilding
January 27, 2016 - Canada Mortgage & Housing Corp.’s latest Housing Market Assessment (HMA) 2016 Q1 reports moderate evidence of overvaluation in housing markets across the country.
By Anthony Capkun
Broken down across the 15 centres covered by the HMA, overvaluation and overbuilding are the most prevalent problematic conditions, with overvaluation detected in eight centres and overbuilding in seven reports CMHC.
“The evidence of overbuilding has increased since the previous assessment in Calgary, Saskatoon, Regina, and Ottawa due to either higher vacancy rates, high inventory of new and unsold units, or a combination of both. As more centres are now showing problematic overbuilding conditions, inventory management is becoming more important,” said Bob Dugan, CMHC’s chief economist.
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The HMA points to strong overall evidence of problematic conditions in Calgary, Saskatoon and Regina due to the detection of overvaluation and overbuilding. Low oil prices are impacting Alberta and Saskatchewan, weakening demographic and economic fundamentals such as migration, employment and income which are, in turn, affecting housing markets.
In Toronto, overall strong evidence of problematic conditions reflects a combination of price acceleration and overvaluation. CMHC says it is also monitoring for the potential emergence of overbuilding in Toronto due to the high number of condominium units under construction. “Inventory management, therefore, continues to be necessary to make sure that these condominium units under construction do not remain unsold upon completion.”
In Winnipeg, the evidence of problematic conditions has been lowered from strong to moderate. This is due to the evidence of overvaluation being reduced with improving economic and demographic fundamentals.
The HMA evaluates the extent to which there is evidence of problematic housing market conditions in 15 Census Metropolitan Areas (CMAs). The results here include those for the national market as well as Victoria, Vancouver, Edmonton, Calgary, Saskatoon, Regina, Winnipeg, Hamilton, Toronto, Ottawa, Montreal, Quebec, Moncton, Halifax, and St. John’s.
The HMA analytical framework is designed to assess housing market conditions by taking into consideration the economic, financial and demographic drivers of housing markets. The use of multiple indicators of housing conditions, which incorporate various data sources and price measures, provides CMHC with a “robust picture” of overall housing market conditions.