Soaring housing prices put Toronto market on crash course
Canadian housing agency expresses concern over long surge in costs in country's largest city but sees no overheating in overall market
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 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 showed 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 residents who say ordinary Canadians have been priced out of the market entirely.
"Our overall assessment of the risk of problematic conditions varies from centre to centre due to regional differences in housing markets," 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 under way in some 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 per cent in six years, and some analysts believe the market is at risk of a US-style crash.
In its quarterly measure of four risk factors that could indicate problematic conditions in the housing markets, the agency 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.
It did warn about Toronto, noting a strong price acceleration.
"The rise in house prices has not been matched by growth in personal disposable income, giving rise to a modest risk of overvaluation," it said.
It also said the overall assessment of risk was high for Winnipeg, due to overvaluation and overbuilding, and in Regina, where there were concerns about price acceleration, overvaluation and overbuilding, particularly of condominiums.
A glut of condos is also being monitored in Toronto, Ottawa and Montreal.
"Condominium units under construction are near historical peaks. Inventory management is therefore necessary to make sure that these condominium units under construction do not remain unsold," the report said.