A new report just released by the CHMC (Canadian Mortgage and Housing Corporation) has raised the Canadian housing market risk level from moderate to high.
High home prices and buyer expectations of continued price growth have put the country’s housing market at increased risk of a correction, Canada’s housing agency said on Tuesday.
This is the second time the national risk level has been raised to high. Prior to May 2019, the indicator had flagged the country’s housing market vulnerability as “high” for preceding 10 straight quarters.
“Exceptionally strong demand and home price appreciation through the course of the pandemic may have contributed to increased expectations of continued price growth for homebuyers in several local housing markets across Ontario and Eastern Canada,” Bob Dugan, CMHC’s chief economist, said in a release. “This, in turn, may have caused more buyers to enter the market than was warranted.”
Improved housing fundamentals in the first half of the year, such as historically low interest rates, government support programs and the rollout of mass vaccination programs, led to an increase in purchasing power, disposable income and employment, CMHC noted. These factors, however, weren’t enough to justify the rapid price growth over this period.
The housing agency said the high vulnerability at the national level was “largely a reflection of problematic conditions in several local housing markets across Ontario and Eastern Canada.” This included Montreal’s vulnerability being raised to high from moderate.
Vancouver’s market vulnerability, on the other hand, was reduced to a “low” rating following a slowdown in price growth and home sales.
CMHC Housing Market Assessment table Q3 2021
Six of the census metropolitan areas (CMAs) tracked by CMHC are now in the high-risk zone, up from five in the second quarter.