Scarborough town centre condos . The two cities with the highest risk of real estate in Canada have been lifted. According to the latest assessment report of the Canadian Real Estate loan Center, the two riskiest cities in Canada, Toronto and Hamilton, have reduced their risk levels, from high-risk High risk, high-valuation Overvalue, to medium-risk Moderate, respectively.
CMHC believes that property prices in the two cities now better reflect the fundamentals of the economy. After the update of the report, only Victoria and Regina of BC Province in Canada still top the list of risk assessments.
With regard to market overheating, CMHC measures whether sales are significantly higher than listed; in terms of price increases, it depends on whether the slope of price increases is higher than the average, and excessive increases often represent speculative markets; in terms of value evaluation, CMHC focuses on other fundamentals such as whether house prices rise above income levels and whether mortgage interest rates begin to move. As for the supply of the property market, it depends on the vacancy rate of the housing rental market and whether the uncompleted volume of new housing is above the average.
According to these standards, CMHC uses different colors to show the current state of the real estate market. Green indicates that everything is normal in the real estate market, yellow indicates that there is evidence of problems in the real estate market, and red indicates that there are serious problems in the real estate market.
Toronto has been listed as overvalued by the CMHC for the past four years, and taking off the high-risk hat this time is good news for the Toronto property market. ‘We are seeing clear signs of improvement in the imbalance in the real estate market, ‘said Bob Dugan, chief economist at CMHC.
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The report is based on property market information at the end of June, which has rebounded sharply in Toronto and Vancouver since June, with buyers flocking in and prices rising.
Since the Toronto real estate market was listed as a high-risk market in 2015, the value of Toronto real estate has bottomed out with subsequent price adjustments. Home sales in Toronto surged 14% in October, and average house prices rose 5.5%! Hamilton, Ontario is also the first time it has been removed from the list of high-risk real estate cities since the third quarter of 2016, and CMHC believes current prices are in line with local economic fundamentals.
However, it does not seem to be good enough. The probability of the Bank of Canada cutting interest rates at the end of the year began to rise after a net loss of 1800 jobs after this week’s October employment data. The Canadian dollar, which is most sensitive to interest policy, fell sharply this week, falling from above 76 cents.
The fall of the Canadian dollar exchange rate has caused many people to imagine the inflow of foreign capital into Canadian real estate! The sharp depreciation of the Canadian dollar in 2015 and the inflow of overseas capital into Canada led to two consecutive years of skyrocketing real estate. If the Canadian dollar depreciates sharply again this year, will the good situation of two years ago be repeated?
Apart from Toronto, the premises in Hamilton are so popular that few people can think of it. Due to the extraordinarily high house prices in Toronto, a large number of Chinese pour into the surrounding cities, Hamilton house prices skyrocketing is also very high in the full plus house prices ranking. Because of the famous McMaster University, many Chinese who buy houses are basically international students and retired elderly.
The house is bought next to the university and has a very stable rental income. In a city with a large number of unemployed people, driven by this trend, house prices in Hamilton have also risen sharply, which can be described as a spectacle in economics! It seems that all of Canada’s structural economic problems have been resolved by the red-hot temperature of the real estate market.
Throughout the past decade, the Canadian government’s low interest rate policy since 2009 has not only helped the Canadian economy out of the swamp, but also pushed up real estate prices, putting the Canadian financial system at risk. Canadian banks are no longer as secure as they were then! Then, from historical experience, Canada’s road to stimulate the economy will eventually return to the old path of monetary policy, basically will choose currency devaluation.
