CMHC says Vancouver market no longer ‘highly vulnerable’ as price acceleration eases

Canadian Real Estate Association projects that the national average price will drop 0.6 per cent

The Canada Mortgage and Housing Corp. has lowered the vulnerability rating of Vancouver’s housing market to ”moderate,” marking the first change in three years as prices have eased.

The federal agency says in a report that “evidence of price acceleration” in Vancouver has eased to low, prompting a downrating after 12 consecutive quarters of being flagged as “highly vulnerable.”

“While home price growth over the past few years significantly outpaced levels supported by fundamentals, these imbalances have narrowed through growth in fundamentals and lower home prices in different segments of the resale market,” CMHC said in its latest Housing Market Assessment report.

The agency said a moderate degree of vulnerability remains at the national level, but imbalances between house prices and housing market fundamentals have narrowed over the past year. However, certain markets such as Toronto and Victoria are at higher risk.

Nationally, the inflation-adjusted average price decreased 5.6 per cent in the first quarter of 2019 from the same period a year earlier, the fifth-consecutive decline on a year-over-year basis, CMHC said.

READ MORE: B.C. housing sales predicted to slow, prices to fall in 2019

In the previous quarter’s report, CMHC lowered its rating for Canada’s overall housing market from to moderate from high vulnerability — where it had stood for 10 consecutive quarters — as mortgage stress tests introduced last year made it harder for homebuyers to qualify and eased price acceleration.

The Canadian Real Estate Association’s latest market forecast released in June projects that the national average price will drop 0.6 per cent by the end of this year to roughly $485,000, compared to the 4.1 per cent drop recorded in 2018.

However, the pattern is split between the eastern and western parts of the country. For example, while average prices are forecast to fall in British Columbia, Alberta and Saskatchewan, higher prices are expected in Ontario, Quebec and the Maritimes.

Dropping housing prices are a particularly welcome sight in Vancouver, which was cited in January as the second-least affordable major housing market in the world out of 91 markets by urban planning company Demographia. Vancouver came second to Hong Kong, but was less affordable than the likes of San Francisco and London, U.K.

The latest statistics from the Real Estate Board of Greater Vancouver showed that the benchmark price of a home in Metro Vancouver dropped to $998,700 in June, the first time it fell below the $1 million mark since May 2017.

The Bank of Canada in May also said that housing prices in the key markets of Vancouver and Toronto have cooled, but imbalances in real estate markets are still an important vulnerability for the overall financial system.

CMHC’s bases its vulnerability assessment on several criteria including price acceleration, overvaluation, overbuilding, and overheating. It examines the degree of vulnerability and is intended to identify imbalances in the housing market.

Toronto, Hamilton and Victoria continue to have a high degree of vulnerability, but overheating, price acceleration and overvaluation show signs of abating in all three markets.

Edmonton, Calgary, Saskatoon, Regina and Winnipeg have moderate vulnerability, but evidence of overbuilding remains.

Ottawa, Quebec City, Halifax, St. John’s, N.L., Montreal, Moncton, N.B., all have low overall vulnerability. However, overheating persists in Montreal and Moncton while overbuilding remains in St. John’s, CMHC added.

For the second consecutive quarter, moderate evidence of overvaluation continues to be the only sign of vulnerability for Canada as a whole, said CMHC’s chief economist Bob Dugan.

“Imbalances between house prices and housing market fundamentals have narrowed with declining home prices in the resale market and a growing pool of potential first-time homebuyers,” he said in a statement. “This dynamic contributes to closing the overvaluation gap.”

Armina Ligaya, The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Infrastructure upgrades about to get underway on Bowen Road

Nighttime road work to start next Monday, June 8, between old Island Highway and Labieux Road

Resiliency program set up to help Island tourism through ‘grim’ times

Tourism Vancouver Island CEO says 23-25 per cent of tourism businesses may shut down permanently

Column: Vulnerability to global disasters is our own making

For many, needs of the moment take precedence over concerns about sustainability, notes columnist

House burns in Harewood, three people displaced

Dog unaccounted for after house fire Sunday evening

VIDEO: A Vancouver Island black bear takes weekend nap in eagle tree

Videos captured by Terry Eissfeldt shows the bear arriving Saturday night and sleeping in on Sunday

COVID-19 birthday drive-by celebrations snuffed out in Island community

Bylaw officer visit with threats of a fine mean parade trucks taken off the road

Vancouver Island Regional Libraries to offer ‘takeout’ style services

VIRL will offer the service on a branch-by-branch basis

Facing changes together: Your community, your journalists

The COVID-19 pandemic has changed the world in ways that would have… Continue reading

George Floyd asphyxiated by sustained pressure: family autopsy

Death sparked a wave of protests across the U.S. and abroad

COVID-19: B.C. commercial landlords can’t evict if they decline rent assistance

Emergency order ‘incentive’ for federal program, Carole James says

B.C. Hockey League prepping for 2020-21

League reviewing different scenarios and start times in compliance with provincial regulations

Duncan’s Queen Margaret’s School pioneers thermal imaging in school reopening

Private school is first in B.C. to use new tech post-COVID-19

Most Read