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Summary
- The housing market in Canada faces vulnerability for the second consecutive quarter.
- Areas like Toronto and Halifax, which are witnessing a price surge, have moved from moderate to high degrees of vulnerability.
- Finance Minister Chrystia Freeland said that the government is monitoring the situation closely.
As housing prices continue to soar and mortgage rates remain low, warnings are being issued that the real estate market may soon start to overheat. Canada Mortgage and Housing Corp. (CMHC) on Thursday said that housing sectors in some areas are prone to vulnerabilities for the second consecutive quarter.
The housing agency says that the market is showing signs of overheating for the first time.
The CMHC stated that areas like Toronto, Halifax, Hamilton, Moncton and capital city Ottawa have contributed to this risk as they all had ‘high’ levels of vulnerability in the first quarter of 2021. All these places are experiencing a price hike and overvaluation.
Bob Dugan, the chief economist of CMHC, said in a statement that some rural areas are also responsible for overheating and market pressure. He said that the rural areas don't get vulnerability ratings but they are considered for national analysis.
Here's How Housing Market Vulnerability Is Assessed
A quarterly assessment done by CMHC assigns vulnerability ratings to the country's housing market. For example, the ratings could be low, moderate and high. These ratings are based on some factors such as overheating, price hike, overvaluation of the properties and surplus inventories.
For the second consecutive quarter, the assessment gave an overall ‘moderate’ rating to the country's housing market vulnerability.
Areas like Toronto and Halifax, which are witnessing a price surge, have moved from ‘moderate’ to ‘high’ degree of vulnerability, according to the latest assessment. The reason for this is a hike in housing prices in Ontario and overvaluation in Nova Scotia.
Just like the previous quarter, Hamilton and Moncton markets maintained their ‘high’ vulnerability because both the markets are yet to cool off.
Source: Pixabay
Just like the previous quarter, CMHC has put Vancouver, Montreal and Victoria as ‘moderately’ vulnerable.
Federal government keeping a strict vigil
Soon after the CMHC report was out, the government said that it is keeping a strict watch on the housing markets.
During a press conference, Finance Minister Chrystia Freeland said that the government is aware of the challenges Canadians may face due to the present housing market situation and that they are monitoring the situation very closely and carefully.
