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Speculation likely still driving up house prices in B.C., Toronto, Hamilton, CMHC says

Three months after issuing its first red warning on the state of the country’s housing market, CMHC said Thursday that strong evidence of “problematic” conditions nationally have continued for a second consecutive quarter.

The federal agency said in its latest quarterly market analysis that those conditions persisted due to overvaluation and price acceleration.

CMHC said its assessment largely accounts for market conditions in Vancouver and Toronto, where strong price growth has been spreading to other areas.

“Price acceleration in Vancouver, Victoria, Toronto and Hamilton indicates that home price growth may be driven by speculation as it is outpacing what economic fundamentals like migration, employment and income can support,” said Bob Dugan, the agency’s chief economist.

“Home buyers should ensure that their purchases are aligned with their needs as well as the long-term market outlook,” he said.

The federal agency said house prices grew nationally by seven per cent year-over-year at the end of the third quarter of 2016 after adjusting for inflation. However, CMHC said, removing Ontario from the calculation would have seen prices remain flat through to the third quarter.

CMHC said overvaluation and overbuilding remain the most prevalent problematic conditions seen in its analysis, with those conditions detected in eight of the 15 cities covered.

Evidence of problematic conditions has increased in Victoria since its last assessment in October 2016 due to moderate evidence of price acceleration and overvaluation, CMHC said. Meanwhile, Calgary saw conditions ease as some housing markets in oil-dependent centres are now rebalancing.

Conditions in the other 13 markets included in the quarterly survey remained unchanged.

Last week, CMHC said it will charge borrowers a few dollars more every month to insure their mortgages, starting March 17.

original source material : CBC News