Vancouver is showing “strong” signs of problematic conditions, Canada’s housing agency said Wednesday, weighing in after curbs on the market imposed by the British Columbia and federal governments to avoid a crash.
Canada Mortgage & Housing Corp. raised Vancouver’s risk rating -- moving it to the highest level for the first time -- from “moderate” in April and “weak” in January. The west coast city is strained by overvaluation, price acceleration and demand that’s outstripping supply, the Ottawa-based agency said.
Moves to curb a potential bubble in Vancouver have increased as year-over-year price gains swell to 32 percent, and amid anecdotal reports of bidding wars on even the most run-down properties. The British Columbia government unveiled a new 15 percent tax on foreign buyers on Monday, and Bank of Canada Governor Stephen Poloz recently warned buyers to plan for the possibility that prices may stall or decline.
“It’s designed to be an early warning system but it’s also designed to pick up a certain amount of persistence in the indicators before we escalate overall market conditions to strong evidence of problematic conditions,” CMHC Chief Economist Bob Dugan said on a conference call Wednesday, when asked by a reporter why the agency had waited to give Vancouver the highest risk rating.
Rapidly rising prices in Canada’s largest cities may soon drag the national market into the strongly problematic category, housing officials said. Toronto, the nation’s biggest city, was also maintained at a strong rating.
“By the time of the next Housing Market Assessment in October, growth in home prices in parts of British Columbia and Ontario may have been sufficient to provide strong evidence of problematic conditions for Canada overall,” the agency said in the report.
CMHC tracks 15 Canadian cities for signs of stress including overvaluation, sustained price acceleration, overbuilding and overheating when demand outpaces supply. Calgary, as well as the Saskatchewan cities of Regina and Saskatoon, also carry the strong rating for problematic overall conditions.
In Vancouver, benchmark prices for single-family detached homes reached C$1.56 million ($1.18 million) in June, up 39 percent from a year earlier, according to broker figures.
“Single-detached home prices continue to be at levels higher than those consistent with financial, economic and demographic fundamentals,” the agency said.