UPDATE 1-Canada housing agency sees overvaluation in most cities
(Adds regional detail, price data)
By Andrea Hopkins
TORONTO Oct 29 (Reuters) - Canada's housing market is overvalued in most major cities, with prices in Toronto and Vancouver accelerating faster than economic fundamentals, and prices have remained high even in cities where the economy is struggling, the federal housing agency said on Thursday.
In a report that highlights the nation's uneven real estate market, the Canada Mortgage and Housing Corp said there is strong evidence of overvaluation in Toronto, the nation's largest market, while evidence of overvaluation in Vancouver has ratcheted up to moderate from low three months ago.
While those two cities have long been Canada's hottest housing markets, there is also overvaluation in many other centers - but for a different reason, the CMHC report showed. In the case of western Canadian cities like Winnipeg, Regina and Saskatoon, prices remain high even as the economy sags.
"The most prevalent issue detected in 11 of the 15 centers covered by the HMA is overvaluation," Bob Dugan, CMHC's chief economist, said in the agency's quarterly Housing Market Assessment (HMA).
"The continued rise in house prices (in Toronto) has not been matched by growth in economic and demographic fundamentals giving rise to strong evidence of overvaluation," the report noted.
Canada's housing market has been in a prolonged boom since 2009 and economists have repeatedly warned that the sector is at risk of a correction, though they disagree over whether the market will manage a soft-landing or will crash.
Canadian home prices have climbed 45 percent since April 2009, according to the Teranet-National Bank Home Price Index. Toronto prices have climbed 72 percent in that period and Vancouver prices are up 51 percent. Continued...