CMHC Releases its 2016 Q1 Housing Market Assessment Report for Canada and 15 Markets

OTTAWA, January 27, 2016 — Canada Mortgage and Housing Corporation’s (CMHC) latest Housing Market Assessment (HMA) 2016 Q1 reports moderate evidence of overvaluation in housing markets across the country. Broken down across the 15 centres covered by the HMA, overvaluation and overbuilding are the most prevalent problematic conditions with overvaluation detected in eight centres and overbuilding in seven centres.

“The evidence of overbuilding has increased since the previous assessment in Calgary, Saskatoon, Regina, and Ottawa due to either higher vacancy rates, high inventory of new and unsold units, or a combination of both. As more centres are now showing problematic overbuilding conditions, inventory management is becoming more important,” said Bob Dugan, CMHC’s Chief Economist.

The HMA points to strong overall evidence of problematic conditions in Calgary, Saskatoon, and Regina due to the detection of overvaluation and overbuilding. Low oil prices are impacting Alberta and Saskatchewan, weakening demographic and economic fundamentals such as migration, employment, and income, which are in turn affecting housing markets.

In Toronto, overall strong evidence of problematic conditions reflects a combination of price acceleration and overvaluation. We are also monitoring for the potential emergence of overbuilding in Toronto due to the high number of condominium units under construction. Inventory management therefore continues to be necessary to make sure that these condominium units under construction do not remain unsold upon completion.

In Winnipeg, the evidence of problematic conditions has been lowered from strong to moderate. This is due to the evidence of overvaluation being reduced with improving economic and demographic fundamentals.

The HMA evaluates the extent to which there is evidence of problematic housing market conditions in 15 Census Metropolitan Areas (CMAs). The results released today include those for the national market as well as 15 Census Metropolitan Areas (CMAs) – Victoria, Vancouver, Edmonton, Calgary, Saskatoon, Regina, Winnipeg, Hamilton, Toronto, Ottawa, Montréal, Québec, Moncton, Halifax, and St. John’s.

The HMA analytical framework is designed to assess housing market conditions by taking into consideration the economic, financial and demographic drivers of housing markets. The use of multiple indicators of housing conditions, which incorporate various data sources and price measures, provides a robust picture of overall housing market conditions.

Additional information explaining the results for the 15 CMAs is available in the attached backgrounder. The full text of the January 2016 HMA report is available athttp://www.cmhc.ca/HMA.

The next Housing Market Assessment report is scheduled to be released on April 27, 2016.

As Canada’s authority on housing, CMHC continually works to increase the amount of available data and analysis on the housing market.

CMHC draws on 70 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.

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For more information see the attached Backgrounder.

For further information contact:

Jonathan Rotondo
CMHC Media Relations
613-748-2734
jrotondo@cmhc-schl.gc.ca

Backgrounder

CMHC’s HMA analytical framework is designed to evaluate the extent to which there is evidence of problematic housing market conditions in Canadian housing markets. The framework assesses housing market conditions and considers the incidence, intensity and persistence of four main factors:

1. Overheating of demand in the housing market, wherein demand significantly outpaces supply.
2. Acceleration in the growth rate of house prices, which could be partially reflective of speculative activity.
3. Overvaluation in the level of house prices, which indicates that house price levels are not fully supported by fundamental drivers such as income, mortgage rates and population.
4. Overbuilding of the housing market, which suggests that supply significantly outpaces demand.

Each of these factors is measured using one or more indicators of housing demand, supply and/or price conditions. Table 1 outlines the results from the previous release in October 2015 and the current January 2016 release.

Note 1: Colour codes indicate the level of evidence of problematic conditions: The HMA reflects a comprehensive framework that not only tests for the presence or incidence of signals of potentially problematic conditions, but also considers the intensity of signals (that is, how far the signal is from its historical average) and the persistence of signals over time. Generally, low intensity and persistence are associated with a lower potential of evolving into a problematic condition. As the number of persistent signals increases, the associated evidence of a problematic condition developing increases.

Note 2: Results at the CMA level are not segmented by housing type or neighbourhood. They represent an assessment of the entire CMA.

Note 3: The colour scale extends to red only for those factors that have multiple indicators signaling significant incidence, intensity and persistence of potentially problematic conditions. As a result, only overvaluation and overbuilding can receive a red rating, since they are assessed using more than one indicator.

Note 4: To ensure the framework is as current as possible, on a regular basis, we undertake a model selection process whereby our house price models for overvaluation are tested for statistical significance at the national and CMA level. The result of this process may change the number of indicators of a problematic condition from the previous assessment.