Photo: Tyler Farmer / Unsplash
Canada’s housing market is seeing a “high degree of vulnerability,” in the face of continued price acceleration and overvaluation.
In its Q3-2021 Housing Market Assessment, the Canada Mortgage and Housing Corporation (CMHC) stated that a high degree of market vulnerability has been created at the national level as a reflection of “problematic conditions,” detected in several local markets within Ontario and Eastern Canada.
Between CMHC’s March 2021 and September 2021 reports, the rating of national market vulnerability escalated from “moderate” to “high.” The corporation explained that high vulnerability means that the market is more susceptible to a potential downturn that would result in greater consequences if one were to occur.
The Greater Toronto Area remained at a high degree of market vulnerability between March and September. Even though home sales have started to ease off, the demand-supply imbalance within Toronto has contributed to continued price acceleration.
Ottawa, Hamilton, Moncton and Halifax also continued their high vulnerability status. Overheating, overvaluation and price acceleration has plagued the Hamilton market, while Ottawa continues to experience pressure on upward price growth thanks to historically-low home inventory. High sales and limited supply has similarly caused persistent pressure on Halifax home values, while there is an “underlying disconnect between the supply and demand for housing,” in Moncton, CMHC says.
Graph: Canada Mortgage and Housing Corporation (CMHC)
In the first half of 2021, low interest rates, government support and vaccination rollout provided Canadians with greater purchasing power, employment and disposable income, explains CMHC. However, recent home price growth “was not fully explained by these improving housing market fundamentals.”
The first half of the year reported historically high levels of sales as demand outpaced available home supply. Although sales moderated in Q2-2021, market overheating was still noticeable at the national level. CMHC noted that there is “low evidence” of excess inventory in the absence of unusually high levels of vacant, newly built, and unsold housing units.
“Exceptionally strong demand and home price appreciation through the course of the pandemic may have contributed to increased expectations of continued price growth for homebuyers in several local housing markets across Ontario and Eastern Canada,” said Bob Dugan, CMHC’s chief economist, in the assessment report.
“This, in turn, may have caused more buyers to enter the market than was warranted.”
Source: www.livabl.com
Posted by Teri-Lynn Jones on
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