Despite high prices, demand for housing is supported by a growing population
Emma Crawford Hampel
Van. Courier
Vancouver has the nation’s highest real estate prices but the city’s market is unlikely to see a correction, according to the Canada Mortgage and Housing Corporation (CMHC).
The risks of overvaluation, overbuilding, market overheating – defined as when demand rapidly outpaces supply – or house price acceleration are all low.
“Despite high Vancouver home prices, demand for housing across the price spectrum is supported by a growing population and growth in personal disposable income,” the agency said in a report. “First-time home buyers focus on lower-priced options in suburban locales.
“At the upper end of the price spectrum, high net worth residents, and those who have gained equity in their homes, are more likely to buy single-detached homes in central locations and luxury property.”
A limited supply of land for development also plays a factor in propping up home prices.
Across Canada, the report shows a mixed bag in terms of risk levels in the various housing market hot spots.
“Modest overvaluation based on national indicators reflects a variety of price conditions across the country with some centres showing more signs of overvaluation than others,” said Bob Duban, CMHC chief economist.
“Likewise, housing market risk factors such as overheating, acceleration in house prices and overbuilding also vary by CMA.”
Regina and Winnipeg are at a particularly high risk of correction.
“In Regina, this reflects price acceleration, overvaluation and overbuilding, particularly of condominium apartments,” said the report, which also pointed to modest gains in personal disposable income and a record high inventory of completed and unsold units.
“In Winnipeg, risk of overvaluation and overbuilding are detected.”
Calgary is at an overall low risk of correction, but there is a chance of overvaluation relating to strong growth in house prices combined with only modest increases in personal disposable income.
“The economy is being impacted by lower oil prices and slower inflows of migrants that will likely contribute to an expected slowdown in the rate of price growth in 2015,” the report said.
Edmonton, Saskatoon, Ottawa, Halifax and St. John’s are unlikely to see price corrections.
Toronto and Montreal are at moderate risk. Toronto has seen consistent price growth and no match in the increase of disposable personal income, while Montreal has had fewer first-time buyers.
© 2015 Vancouver Courier
