Toronto and Calgary residential real estate markets are showing strong evidence of “problematic” conditions, Canada’s federal housing agency said in a report, adding to concern risks in the nation’s housing sector are growing.
The determination reflects a combination of price acceleration and overvaluation in Toronto, and overvaluation and overbuilding in Calgary, Canada Mortgage & Housing Corp. said Wednesday in its quarterly Housing Market Analysis. Saskatoon and Regina are also showing “strong” signs of problematic housing markets.
Toronto’s ranking was unchanged from October, while Calgary’s risk worsened to “strong” evidence from “weak” in the prior quarter. Vancouver shows signs of “moderate” overvaluation, unchanged from the previous quarter.
Canadian Finance Minister Bill Morneau introduced a package of tighter home-lending rules in December, citing risks from a surge in prices in Toronto and Vancouver that leave some younger families at risk from outsized mortgages. Prices of single-family homes in those cities often exceed a million dollars and have sparked a surge in condo construction that has drawn warnings from the International Monetary Fund.
“In Toronto, overall strong evidence of problematic conditions reflects a combination of price acceleration and overvaluation,” the CMHC report said. “We are also monitoring for the potential emergence of overbuilding in Toronto due to the high number of condominium units under construction. Inventory management therefore continues to be necessary to make sure that these condominium units under construction do not remain unsold upon completion.”
The overvaluation rating for Montreal, Canada’s second-largest city, was lowered to moderate from strong.