Canada housing agency sees overvaluation, low overheating risk

By Andrea Hopkins
TORONTO, Aug 13 (Reuters) - While Canada's overall housing
market is at low risk of overheating, its largest city, Toronto,
is at high risk of overvaluation, the federal housing agency
said on Thursday in a report that highlights the nation's uneven
real estate market.
Amid concerns that bubbles are growing in several cities,
the Canada Mortgage and Housing Corp said Toronto, Winnipeg and
Regina show high risk of overvaluation, price acceleration or
overbuilding.
It also said Vancouver showed no signs of problematic
housing conditions. That finding was at odds with frequent
complaints about its high home prices from local residents who
say ordinary Canadians have been priced out of the market
entirely.
"Our overall assessment of the risk of problematic
conditions varies from center to center due to regional
differences in housing markets," CMHC Chief Economist Bob Dugan
said in the report.
"Imbalances in local housing markets could be resolved with
further moderation in house prices or improving economic
conditions."
Prices, sales and new housing starts have suggested a
correction is underway in some Canadian markets, notably in
Calgary, Alberta. Alberta is a major oil producer and has been
hit hard by dropping crude prices.
But real estate is roaring ahead elsewhere, including
Toronto, where prices have risen 58 percent in six years, and
some analysts believe the market is at risk of a U.S.-style
housing crash.
In its quarterly measure of four risk factors that could
indicate problematic conditions in Canada's housing markets, the
CMHC said there was modest overvaluation in the national market.
Still, it said there was no concern about overheating, where
demand significantly outpaces supply, an acceleration in the
growth rate of house prices, or in overbuilding, where supply
significantly outpaces demand.
It did warn about Toronto, noting a strong price
acceleration in 2015.
"The rise in house prices have not been matched by growth in
personal disposable income, giving rise to a modest risk of
overvaluation," the report noted.
It also said the overall assessment of risk is high for
Winnipeg, due to overvaluation and overbuilding, and in Regina,
where there are concerns about price acceleration, overvaluation
and overbuilding, particularly of condominiums.
A glut of condos is also being monitored in Toronto, Ottawa
and Montreal.
"Condominium units under construction are near historical
peaks. Inventory management is therefore necessary to make sure
that these condominium units under construction do not remain
unsold," the report said.