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The federal agency has upgraded the risk assessment of the real estate market from medium to high. Home transactions and prices are still close to record levels reached earlier this year, driven by historically low mortgage rates and the pursuit of more living space during the outbreak, CMHC said in a report.
Despite Canada’s rising vaccination rates and improved economy since spring, the housing market remains far stronger than these developments can guarantee, and prices are further out of line with labour income, the agency said.
Bob Dugan, chief economist of CMHC, said on a conference call with reporters: “We are seeing higher prices and overvaluations, which have increased the vulnerability of the Canadian market. I hope we don’t see a big drop in house prices. ”
In its latest report, CMHC not only raised Canada’s national market vulnerability from moderate to high, but also raised the risk assessment of the Montreal housing market from medium to high, increasing the number of major markets considered to be the riskiest in Canada to six.
Vancouver is an obvious exception. Due to the increase in the number of houses in the market, the price growth tends to be stable, so the risk assessment is reduced from medium to low.
At the national level, the CMHC noted evidence of overvalued house prices, saying that the supply of housing was extremely low, which led to an acceleration of price increases. In another sign of high demand relative to supply, the agency saw 85 per cent of new homes sold after completion-the highest proportion since the early 2000s.
Although the CMHC report is limited to the first half of the year, benchmark house prices continued to climb in August, reaching $736600 ($580260), according to data released earlier this month by the Canadian Real Estate Association (CREA). That’s up 21% from a year ago, with Toronto and Vancouver both now costing more than C $1 million.