Montreal and Quebec Homes Are Overvalued, Canada Agency Says

Montreal and Quebec City are most at risk among Canadian cities from overvalued home prices, the head of the federal housing agency said today.

The province of Quebec’s two biggest cities show the most evidence of overvaluation, which Canada Mortgage & Housing Corp. defines as “home prices significantly stronger than warranted by fundamentals,” according to the text of a slide show by Canada Mortgage & Housing Corp. President Evan Siddall.

Siddall’s presentation, delivered during a speech at the RBC Capital Markets Canadian Bank CEO Conference in Toronto, echo forecasts the Ottawa-based agency made in November. The Bank of Canada estimated in a report last month the nation’s residential real estate market may be as much as 30 percent overvalued.

While Siddall’s speech was closed to reporters, CMHC made the slides available by e-mail.

“While some modest overvaluation is observed at the national level, CMHC doesn’t believe there is a bubble in the Canadian housing market,” Siddall said, according to the presentation. Toronto, Calgary and Halifax also show a “modest risk” of overvaluation, he said, adding the trend is improving in Montreal and Quebec City.

Risks to the housing market also include the potential for “overbuilding of condos in some markets,” and “high levels of household debt and high concentration of net worth in illiquid residential real estate,” Siddall said.

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