The risk of overvaluation in Canada's housing market remains
modest overall, the country's national housing agency said
Thursday, but it warned that strong price increases have led to
heightened concerns over the large Toronto market.
Canada Mortgage and Housing Corp., which released the findings
in its quarterly House Price Analysis and Assessment Framework,
also found a higher risk of problematic conditions in the cities of
Winnipeg, Manitoba and Regina, Saskatchewan.
Home prices in Canada have climbed steadily, driven by
rock-bottom interest rates. The Canadian Real Estate Association
said earlier this month that the national average price for resale
homes rose 9.6% in June from a year earlier. Earlier Thursday,
Statistics Canada reported a stronger-than-expected 0.3% rise in
prices for new homes in the same month.
"The overall assessment of risk detected by the framework is
high for Toronto, Winnipeg and Regina. In Toronto, the high overall
risk reflects a combination of price acceleration and
overvaluation," CMHC said. The agency added that overvaluation and
overbuilding are concerns for Winnipeg, while risks in Regina
reflect higher prices, overvaluation and overbuilding, mainly in
the condominium sector.
CMHC's latest findings come amid concerns over the health of the
Canadian economy amid a continuing slump in crude oil prices. The
Canadian economy shrank in the first quarter and has contracted in
each of the first two months of the second quarter. The Bank of
Canada is also forecasting a contraction of 0.5% for the second
quarter. Last month, the central bank cut its overnight interest
rate by 25 basis points to 0.50%, citing in part a
deeper-than-expected fallout from lower oil prices.
In Toronto, "the rise in house prices have not been matched by
growth in personal disposable income," said CMHC chief economist
Bob Dugan in a release.
For Vancouver, CMHC characterized the overall housing-market
risk as "low" in the Western Canadian city.
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