CMHC says Vancouver market no longer ‘highly vulnerable’ as price acceleration eases

Canadian Real Estate Association projects that the national average price will drop 0.6 per cent

The Canada Mortgage and Housing Corp. has lowered the vulnerability rating of Vancouver’s housing market to ”moderate,” marking the first change in three years as prices have eased.

The federal agency says in a report that “evidence of price acceleration” in Vancouver has eased to low, prompting a downrating after 12 consecutive quarters of being flagged as “highly vulnerable.”

“While home price growth over the past few years significantly outpaced levels supported by fundamentals, these imbalances have narrowed through growth in fundamentals and lower home prices in different segments of the resale market,” CMHC said in its latest Housing Market Assessment report.

The agency said a moderate degree of vulnerability remains at the national level, but imbalances between house prices and housing market fundamentals have narrowed over the past year. However, certain markets such as Toronto and Victoria are at higher risk.

Nationally, the inflation-adjusted average price decreased 5.6 per cent in the first quarter of 2019 from the same period a year earlier, the fifth-consecutive decline on a year-over-year basis, CMHC said.

READ MORE: B.C. housing sales predicted to slow, prices to fall in 2019

In the previous quarter’s report, CMHC lowered its rating for Canada’s overall housing market from to moderate from high vulnerability — where it had stood for 10 consecutive quarters — as mortgage stress tests introduced last year made it harder for homebuyers to qualify and eased price acceleration.

The Canadian Real Estate Association’s latest market forecast released in June projects that the national average price will drop 0.6 per cent by the end of this year to roughly $485,000, compared to the 4.1 per cent drop recorded in 2018.

However, the pattern is split between the eastern and western parts of the country. For example, while average prices are forecast to fall in British Columbia, Alberta and Saskatchewan, higher prices are expected in Ontario, Quebec and the Maritimes.

Dropping housing prices are a particularly welcome sight in Vancouver, which was cited in January as the second-least affordable major housing market in the world out of 91 markets by urban planning company Demographia. Vancouver came second to Hong Kong, but was less affordable than the likes of San Francisco and London, U.K.

The latest statistics from the Real Estate Board of Greater Vancouver showed that the benchmark price of a home in Metro Vancouver dropped to $998,700 in June, the first time it fell below the $1 million mark since May 2017.

The Bank of Canada in May also said that housing prices in the key markets of Vancouver and Toronto have cooled, but imbalances in real estate markets are still an important vulnerability for the overall financial system.

CMHC’s bases its vulnerability assessment on several criteria including price acceleration, overvaluation, overbuilding, and overheating. It examines the degree of vulnerability and is intended to identify imbalances in the housing market.

Toronto, Hamilton and Victoria continue to have a high degree of vulnerability, but overheating, price acceleration and overvaluation show signs of abating in all three markets.

Edmonton, Calgary, Saskatoon, Regina and Winnipeg have moderate vulnerability, but evidence of overbuilding remains.

Ottawa, Quebec City, Halifax, St. John’s, N.L., Montreal, Moncton, N.B., all have low overall vulnerability. However, overheating persists in Montreal and Moncton while overbuilding remains in St. John’s, CMHC added.

For the second consecutive quarter, moderate evidence of overvaluation continues to be the only sign of vulnerability for Canada as a whole, said CMHC’s chief economist Bob Dugan.

“Imbalances between house prices and housing market fundamentals have narrowed with declining home prices in the resale market and a growing pool of potential first-time homebuyers,” he said in a statement. “This dynamic contributes to closing the overvaluation gap.”

Armina Ligaya, The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Comments are closed

Just Posted

Severe thunderstorm watch in effect for Cariboo, North Thompson region

Prince George, Quesnel, Williams Lake and 100 Mile House all under watch

Community Foundation wants charities to apply for emergency funding

The $350 million emergency funding was created to help vulnerable populations during COVID-19

Back in Time

Historical Perspective

High water and flooding hits Clearwater

Potential for roadblock on Clearwater Valley Road due to potential washouts

Tk’emlups, Simpcw First Nations chiefs call on Tiny House Warriors to leave Blue River protest camp

“The Tiny House Warriors are not from Simpcw, nor are they our guests in our territory.”

Horrifying video shows near head-on collision on Trans Canada

The video was captured on dash cam along Highway 1

Fraser Valley woman complains of violent RCMP takedown during wellness check

Mounties respond that she was not co-operating during Mental Health Act apprehension

B.C. sees 12 new COVID-19 cases, no new deaths

Three outbreaks exist in health-care settings

Lost dog swims Columbia River multiple times searching for home

The dog was missing from his Castlegar home for three days.

COVID-19: B.C. promotes video-activated services card

Mobile app allows easier video identity verification

ICBC to resume road tests in July with priority for rebookings, health-care workers

Tests have been on hold for four months due to COVID-19

Would you take a COVID-19 vaccine? Poll suggests most Canadians say yes

75 per cent of Canadians would agree to take a novel coronavirus vaccine

Budget officer pegs cost of basic income as calls for it grow due to COVID-19

Planned federal spending to date on pandemic-related aid now tops about $174 billion

Most Read