Overbuilding causes “problematic conditions” in Ottawa housing market: CMHC

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Canada Mortgage and Housing Corporation’s (CMHC) latest Housing Market Assessment (HMA) reports moderate evidence of overvaluation in housing markets across the country, with overbuilding in Ottawa. Broken down across the 15 centres covered by the HMA, overvaluation and overbuilding are the most prevalent problematic conditions with overvaluation detected in eight centres and overbuilding in seven centres.

“The evidence of overbuilding has increased since the previous assessment in Calgary, Saskatoon, Regina, and Ottawa due to either higher vacancy rates, high inventory of new and unsold units, or a combination of both. As more centres are now showing problematic overbuilding conditions, inventory management is becoming more important,” said Bob Dugan, CMHC’s chief economist.

The HMA points to strong overall evidence of problematic conditions in Calgary, Saskatoon, and Regina due to the detection of overvaluation and overbuilding. Low oil prices are impacting Alberta and Saskatchewan, weakening demographic and economic fundamentals such as migration, employment, and income, which are in turn affecting housing markets.

In Toronto, overall strong evidence of problematic conditions reflects a combination of price acceleration and overvaluation. 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.

In Winnipeg, the evidence of problematic conditions has been lowered from strong to moderate. This is due to the evidence of overvaluation being reduced with improving economic and demographic fundamentals.

The HMA evaluates the extent to which there is evidence of problematic housing market conditions in 15 Census Metropolitan Areas (CMAs). The results released today include those for the national market as well as 15 Census Metropolitan Areas (CMAs) – Victoria, Vancouver, Edmonton, Calgary, Saskatoon, Regina, Winnipeg, Hamilton, Toronto, Ottawa, Montréal, Québec, Moncton, Halifax, and St. John’s.

The HMA analytical framework 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 price measures, provides a robust picture of overall housing market conditions.

Additional information explaining the results for the 15 CMAs is available in the attached backgrounder. The full text of the January 2016 HMA report is available at http://www.cmhc.ca/HMA.

The next Housing Market Assessment report is scheduled to be released on April 27.

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