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CMHC Releases Results of Its House Price Analysis

OTTAWA, November 24, 2014 — Results from Canada Mortgage and Housing Corporation’s (CMHC) House Price Analysis and Assessment (HPAA) framework were released today indicating that overall, housing markets in Canada remain broadly consistent with underlying demographic and economic factors such as employment and interest rates. Nevertheless, a modest amount of overvaluation is observed, meaning that house prices are slightly higher than what the underlying factors would suggest.

“CMHC is committed to expanding the availability of information about Canada’s housing markets. This knowledge will ultimately contribute to a stronger housing finance system,” said Evan Siddall, President and Chief Executive Officer of CMHC. “The HPAA adds to CMHC’s efforts to identify, and where appropriate, fill significant data and information gaps.”

The HPAA is a comprehensive framework that is designed to assess housing market conditions by taking into consideration the economic, financial and demographic drivers of housing markets. The use of multiple indicators of housing conditions, which incorporate various data sources and prices measures, provides a robust picture of overall housing market conditions. The results released today include those for the national market as well as 8 Census Metropolitan Areas (CMAs) — Vancouver, Calgary, Edmonton, Toronto, Ottawa, Montreal, Québec and Halifax.

“At the national level, other than a modest amount of overvaluation, we do not detect the presence of other risk factors such as overheating, price acceleration, and overbuilding,” said Bob Dugan, CMHC’s Chief Economist. “Risk of overvaluation is most evident in Montreal and Quebec, but the trend is improving. A modest risk of overvaluation is also present in Toronto, Calgary and Halifax. Across the 8 CMAs examined, there is no overheating or acceleration.”

“There is however a cautionary note with respect to overbuilding in Toronto and Montreal. The number of units under construction is elevated in these centres. This could develop into overbuilding if these units are completed but not sold. To mitigate this risk, builders will need to hit the appropriate balance in channeling new demand between units that are currently under construction but not sold and units that are in the planning stage,” noted Mr. Dugan.

Additional information and results for the 8 CMAs are available in the attached backgrounder. As well, the full text of this article is available in a special edition of Housing Now — Canada Edition.


Housing starts showing signs of easing over next two years: CMHC

OTTAWA: September 3rd, 2014
Canada’s housing market may start showing some signs of slowing down over the next two years as new construction begins to ease, according to the latest forecast by the Canada Mortgage and Housing Corp.

The national housing agency is forecasting housing starts in Canada to range between 179,600 and 189,900 units in 2014 on an annual basis, dropping to a range of between 163,000 and 203,200 units in 2015.

“Recent trends have shown an increase in housing starts, which is broadly supported by demographic fundamentals,” said Bob Dugan, chief economist at CMHC. “However, our latest forecast calls for starts to edge lower as builders are expected to reduce inventories instead of focusing on new construction,” Dugan said Wednesday.

The third quarter outlook also says that Multiple Listing Service sales are expected to range between 450,800 and 482,700 units in 2014, with an average price of between $394,700 and $405,700.

In 2015, the CMHC says Multiple Listing Service sales are expected to range from 455,800 to 502,900 units, with and average price of $396,500 to $416,900.

Across the various regions, housing starts in the Prairies are projected to increase to 52,900 units in 2014 before moderating to 50,800 in 2015, as net migration to that part of the country is expected to decline from the record achieved in 2013, as is employment growth.

Ontario housing activity will regain momentum through the course of 2014 before easing later in 2015, with housing starts in that province ranging between 50,900 and 63,300 units over the next two years.

“An improving economy by 2015 and less out-migration to western Canada will provide support to the broader Ontario housing market,” the CMHC said. “As home prices continue to rise, albeit at a more modest pace, demand will shift to less expensive housing both by type and geography.”

Quebec housing starts are expected to amount to 38,400 units in 2014 and 38,700 units in 2015, as moderate economic and employment growth will hold back demand for existing and new homes.

In Atlantic Canada, housing starts are expected to decline close to 14 per cent in 2014 and a further three per cent in 2015, amid a slowdown in economic growth.

Earlier this week, CMHC said in its monthly update that housing starts increased to a seasonally adjusted annual pace of 200,098 in July, a slight increase from 198,665 in June.

It was the fifth consecutive monthly increase in new housing construction, with gains in urban starts were concentrated in Ontario and Atlantic Canada, while the Prairie provinces and Quebec all recorded declines. There were also modest decreases in British Columbia.

On Wednesday, the Teranet National Bank National Composite House Price Index reported home prices were also up in July, rising 1.1 per cent from the previous month and exceeding the historical average for July. The index measures price changes for repeat sales of single-family homes.

A separate condo report commissioned by Genworth Canada, also out Wednesday, found that population, economic and employment growth all point to a stabilizing of the Canadian condominium market, suggesting that while pockets of higher risk still exist in Toronto and Vancouver, a broad-based downturn is unlikely.