Canada Mortgage and Housing Corporation (CMHC) released its Housing Market Assessment (HMA) report formerly known as the House Price Analysis and Assessment (HPAA) on October 29, 2015 that evaluates the extent to which there is evidence of problematic housing market conditions in 15 Census Metropolitan Areas (CMAs).
The HMA points to strong overall evidence of problematic conditions in Toronto, Winnipeg, Saskatoon and Regina. In Toronto, strong evidence of problematic conditions reflects a combination of price acceleration and overvaluation. Strong evidence of problematic conditions in Winnipeg, Saskatoon, and Regina reflects detection of overvaluation and overbuilding.
"The most prevalent issue detected in 11 of the 15 centres covered by the HMA is overvaluation. The evidence of overvaluation has increased since the previous assessment in Toronto, Vancouver, Montréal, Edmonton, and Saskatoon as price levels are not fully supported by economic and demographic factors," said Bob Dugan, CMHC's Chief Economist. "Problematic overvaluation conditions in local housing markets could be resolved by moderation in house prices and/or improving economic conditions," added Dugan.
The HMA points to moderate evidence of problematic market conditions in Montréal and Ottawa due to overvaluation and rising concerns of overbuilding, particularly of condominium apartments. There also continues to be moderate evidence of problematic conditions in the Québec CMA due to overvaluation.
In Toronto, Montréal and Ottawa, we are monitoring for the potential emergence of overbuilding. Condominium units under construction are elevated. Inventory management is therefore necessary to make sure that these condominium units under construction do not remain unsold upon completion.
The HMA points to weak evidence of overall problematic conditions in Vancouver, though we are now detecting moderate evidence of overvaluation. However, overheating, acceleration in house prices and overbuilding are not a concern in this market.
The results released include those for the national market as well as 15 Census Metropolitan Areas (CMAs) - Vancouver, Victoria, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Toronto, Hamilton, Ottawa, Montréal, Québec, Moncton, St. John's and Halifax.
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 a robust picture of overall housing market conditions.
The full text of the October 2015 HMA report is available at www.cmhc.ca/HMA
The next Housing Market Assessment report is expected to be released in the first quarter of 2016.
As Canada's authority on housing, CMHC continually works to increase the amount of available data and analysis on the housing market.
CMHC draws on more than 65 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.
CMHC's HMA analytical framework is designed to evaluate the extent to which there is evidence of problematic housing market conditions in Canadian housing markets. The framework assesses housing market conditions and considers the incidence, intensity and persistence of four main factors:
- Overheating of demand in the housing market, wherein demand significantly outpaces supply.
- Acceleration in the growth rate of house prices, which could be partially reflective of speculative activity.
- Overvaluation in the level of house prices, which indicates that house price levels are not fully supported by fundamental drivers such as income, mortgage rates and population.
- Overbuilding of the housing market, which suggests that supply significantly outpaces demand.
Each of these factors is measured using one or more indicators of housing demand, supply and/or price conditions. Table 1 below outlines the results from the previous release in August 2015 and the current October release.