While Canada’s housing market remains highly vulnerable, conditions of overvaluation are slowing overall, according to Canada Mortgage and Housing Corporation (CMHC)’s most recent Housing Market Assessment (HMA).

Although overvaluation is still detected in Vancouver, Victoria, Toronto and Hamilton, home prices are moving closer to levels supported by housing market fundamentals, including income, mortgage rates and population. However, these markets continue to display a high degree of vulnerability.

CMHC releases HMAs on a quarterly basis to provide Canadians with both expert and impartial insight and analysis, based on the best data available in the country. CMHC defines vulnerability as imbalances in the housing market, which occur when overbuilding, overvaluation, overheating and price acceleration – or any combination thereof – depart significantly from historical averages.

Results are based on data as of the end of June 2018 and market intelligence as of the end of September 2018. This national report assesses the housing market at the national level and provides summary assessment results for 15 Census Metropolitan Areas (CMAs).

• Nationally, the moderate rating of overvaluation is maintained as a longer period of improved alignment between home prices and fundamentals is necessary for overvaluation to be revised to low.
• Evidence of overbuilding remains high in Edmonton, Calgary, Saskatoon and Regina, so they continue to receive a moderate degree of vulnerability in the overall assessment.
• Ottawa, Quebec City, Moncton, Halifax and St. John’s all sustained a low degree of overall vulnerability, as home prices continue to follow the path of fundamentals.
• Montreal’s resale market is close to overheating, reports CMHC. This creates significant upward pressure on home prices as a result of a sharp tightening between supply and demand.
• In Winnipeg, evidence of overbuilding as well as overall vulnerability grew from low to moderate, reflecting increases in the inventory of newly completed units that remain unsold.

“For the ninth consecutive quarter, there continues to be a high degree of overall vulnerability at the national level, however, we are seeing conditions of overvaluation easing for Canada as a whole,” said Bob Dugan, CMHC’s chief economist, in a press release. “Tighter mortgage rules, rising interest rates and weaker growth in inflation-adjusted personal disposable income – likely lead to reduced demand for housing, resulting in the decline of house prices.”