CMHC: No major risk to Canadian Housing Market
The Canada Mortgage and Housing Corporation (CMHC) has released its House Price Analysis and Assessment (HPAA) framework, which indicated that housing markets remain consistent with underlying demographic and economic factors such as employment and interest rates. The report stated however, that there are is a slight overvaluation, than what they should be based on underlying factors.
The HPAA is a framework that is built to assess housing market conditions, by looking at the economic, financial , and demographic drivers of the market.
Bob Dugan, the CMHC’s Chief Economist stated: “At the national level, other than a modest amount of overvaluation, we do not detect the presence of other risk factors such as overheating, price acceleration, and overbuilding. Risk of overvaluation is most evident in Montreal and Quebec, but the trend is improving. A modest risk of overvaluation is also present in Toronto, Calgary, and Halifax. Across the 8 Census Metropolitan Areas (CMAs) examined, there is no overheating or acceleration.”
However, this did come with a caveat, as the reports points out that there are multiple new construction projects underway, which could indicate overbuilding, if these do not sell when built.
“There is however a cautionary note with respect to overbuilding in Toronto and Montreal. The number of units under construction is elevated in these centres. This could develop into overbuilding if these units are completed but not sold. To mitigate this risk, builders will need to hit the appropriate balance in channeling new demand between units that are currently under construction but not sold and units that in the planning stage” stated Bob Dugan.