The CMHC publishes quarterly reports on the Canadian housing market, in which they evaluate the extent to which there are “problematic housing market conditions” in Canada’s 15 major urban centres. Click here to view their latest report.
For CMHC, the term ‘problematic’ encompasses four factors related to the dynamics of the market:
- Overheating – that is, demand significantly outstripping supply
- Acceleration in the rate of growth of house prices – that is, not just how quickly prices are increasing but whether the rate of increase itself is growing
- Overvaluation of house prices, based on affordability
- Overbuilding – that is, the supply of new homes outpacing demand
CMHC also considers how these factors are changing over time from one quarter to the next.
Based on this evaluation framework, CMHC says that there is ‘strong evidence of problematic conditions’ in Toronto’s housing market because of:
- Continued acceleration of the price of single detached homes in the first half of 2015
- Declining inventory of single detached homes for sale, driving prices up due to buyer competition
- Continued strains on affordability as prices rise much faster than incomes
- Reduced completions of new condos, combined with very low rental vacancy rates, suggesting that unsold inventory of new condos will be absorbed very well
CMHC summarizes the evidence of ‘problematic conditions’ in the 15 Canadian urban centres in this table:
Toronto is joined by Winnipeg, Regina and Saskatoon as cities with ‘strong’ evidence of problematic conditions.
Here we have yet another voice joining the chorus of those suggesting that Toronto house prices are too high and that present trends are unsustainable. After several years of such warnings, during which time the Toronto market has continued to power upward inexorably, a muted reaction to this latest piece of negative news would not be surprising.