Canada housing agency sees overvaluation, low overheating risk

Thu Aug 13, 2015 1:05pm EDT
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By Andrea Hopkins

TORONTO (Reuters) - While Canada's overall housing market is at low risk of overheating, its largest city, Toronto, is at high risk of overvaluation, the federal housing agency said on Thursday in a report that highlights the nation's uneven real estate market.

Amid concerns that bubbles are growing in several cities, the Canada Mortgage and Housing Corp said Toronto, Winnipeg and Regina show high risk of overvaluation, price acceleration or overbuilding.

It also said Vancouver showed no signs of problematic housing conditions. That finding was at odds with frequent complaints about its high home prices from local residents who say ordinary Canadians have been priced out of the market entirely.

"Our overall assessment of the risk of problematic conditions varies from center to center due to regional differences in housing markets," CMHC Chief Economist Bob Dugan said in the report.

"Imbalances in local housing markets could be resolved with further moderation in house prices or improving economic conditions."

Prices, sales and new housing starts have suggested a correction is underway in some Canadian markets, notably in Calgary, Alberta. Alberta is a major oil producer and has been hit hard by dropping crude prices.

But real estate is roaring ahead elsewhere, including Toronto, where prices have risen 58 percent in six years, and some analysts believe the market is at risk of a U.S.-style housing crash.

In its quarterly measure of four risk factors that could indicate problematic conditions in Canada's housing markets, the CMHC said there was modest overvaluation in the national market. Still, it said there was no concern about overheating, where demand significantly outpaces supply, an acceleration in the growth rate of house prices, or in overbuilding, where supply significantly outpaces demand.   Continued...

Realtors' signs are hung outside a newly sold property in a Vancouver neighbourhood, in this September 9, 2014 file photo. REUTERS/Julie Gordon