CMHC says housing vulnerability moderate in Metro Vancouver
Credit to Author: Tiffany Crawford| Date: Thu, 20 Feb 2020 22:18:45 +0000
Metro Vancouver’s housing has maintained a moderate degree of vulnerability as analysts remain cautious of imbalances in the market, according to a Canada Mortgage and Housing Corporation report.
Vancouver’s housing market stability went from a rating of highly vulnerable to moderate last summer for the first time in three years.
The latest CMHC’s Housing Market Assessment, released Thursday, says house prices are falling as consumers face reduced buying power because of a drop in disposable income and higher interest rates.
The corporation maintained a rating of moderate, however, for overvaluation since the threshold was breached at least twice in the year before the third quarter of 2019. Overvaluation is detected when house prices remain significantly above the levels warranted by drivers of housing markets such as income, population, and actual and expected financing costs.
Vacancy rates continue to remain low so there is little evidence of overbuilding, which is flagged when the rental apartment vacancy rate and inventory of newly built and unsold housing units are significantly above normal levels.
Inventories have started to trend upward in the region, the report says, but remain well below the overbuilding threshold.
The report also found a low level of overheating, when sales outpace new listings in the market for existing homes.
“Vancouver’s housing market is assessed as being moderately vulnerable. Overvaluation was detected in recent quarters and we remain cautious of imbalances in the market,” said CMHC senior analyst Braden Batch.
“The most recently assessed data shows that fundamental house prices declined on weaker consumer purchasing power, and indeed inflation adjusted house prices reflected the fundamental changes in the market, indicating that imbalances have diminished.”
The shift to moderate vulnerability happened as the CMHC dropped its red flag on real estate price acceleration, taking it from a moderate rating last May to its current low rating. Price acceleration happens when there is speculative activity.
Elsewhere, several Canadian cities were downgraded to low vulnerability from moderate in Thursday’s report, including Edmonton, Calgary, Saskatoon and Winnipeg.
Victoria is the lone market maintaining a high degree of vulnerability, as price acceleration and overvaluation imbalances are still evident, says the CMHC.
Ottawa, Montréal, Québec City, Moncton, Halifax and St. John’s maintained low vulnerability ratings.
— With files from Joanne Lee-Young
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