Langstaff Gateway Condos by Kylemore.The Canadian housing market is overheating. Canada’s largest public mortgage provider said homes in Canada’s largest city were still overvalued in the second quarter as the epidemic affected the number of homes available for sale, while prices in other Canadian cities were also heating up.Please Visit: Langstaff Gateway Condos by Kylemore to Get Your VVIP Registration Today!
“the sharp decline in new listings has led to low inventory levels, which has kept some pressure on prices in the local housing market, which was strong before the crisis,” CMHC said in its second-quarter housing market assessment report on Monday.
This led to an increase in overvaluation in Vancouver and Toronto and a decrease in Monckton and Halifax, the federal agency said. Prices have accelerated in Ottawa and Montreal.
Bob Dugan, the agency’s chief economist, said on a conference call that the extent to which property values were overvalued across Canada was “probably undervalued” because of a temporary surge in disposable income generated by federal income subsidies. Offset by job losses.
After Vancouver and Toronto entered the second quarter of 2020, the housing market imbalance was generally resolved. However, despite COVID-19 ‘s decline in economic and demographic fundamentals, both experienced some increases in house prices in the second quarter, causing average property values in both markets to be overvalued. ”
At the same time, in eastern Canada, Ottawa, Montreal, Monckton and Halifax entered the second quarter of 2020, their respective housing markets were out of balance. Although the fundamentals of the housing market are generally weak, house prices in the four places have been growing before the arrival of COVID-19 and continue to grow in the second quarter. This led Monckton and Halifax to find that house values were moderately overvalued, while rising house price growth signalled acceleration in Ottawa and Montreal. The housing markets in Ottawa, Monckton and Halifax are currently assessed as moderately ‘vulnerable’ as a whole. ”
Dugan said the oil price woes were exacerbated by the pandemic, dampening the housing markets in Edmonton and Calgary, where prices fell in the second quarter, though less than market fundamentals suggested. Both markets have been affected by overconstruction that began five years ago, he said.
Dugan declined to predict whether the market in the Greater Toronto area would increase its “vulnerability”, saying that although the market in the Greater Toronto area was generally overvalued, the situation was too complex.
The economist stuck to the agency’s previous forecast that average house prices could fall by as much as 18%, pointing out that they almost touched a 12% drop in April, although house prices have rebounded since then. But many risks from the epidemic and other factors remain. “I don’t think we’re out of the woods,” he said.
Dugan said high household debt, a jump in deferred mortgages, the temporary increase in disposable income from federal programs to mitigate job losses in a pandemic, and the impact of a pandemic on delaying long-term decisions are all affecting markets.
“I do not believe that we have a sustainable housing demand basis and the economic interference related to COVID-19, which is why I insist on forecasting. I may be wrong in the timeline forecast, but I certainly believe that in the overall trend, there is some room for falling prices and weakening demand. After this situation is resolved, once we have the vaccine, the housing market will eventually recover.”
Canadian mortgage and housing companies rated the overall Canadian market as “moderately weak” despite lower interest rates and federal wage subsidies due to general weakness in housing market fundamentals such as job losses.
The Bank of Canada cut its benchmark interest rate to 0.25% in March from 1.75% in January. The epidemic had already begun.
In the quarterly assessment, the agency believes that after comparing factors such as overheating (when sales are much more than newly listed), price acceleration, overvaluation and overconstruction (when the inventory of unsold homes is much higher than normal), prices and personal disposable income, population and interest rates, it is concluded that property values are “overvalued”.