Toronto’s housing market vulnerability moved from “high risk” to “moderate” for the first time since 2015 according to the Canada Mortgage and Housing Corporation (CMHC).
The federal housing agency reports the reduced vulnerability resulted from an easing in the overvaluation rating from moderate to low as house prices dipped by 0.8% in the second quarter of 2019 from the same period a year earlier.
The Housing Market Assessment (HMA) report concludes the results are more in line with housing market fundamentals like population growth, personal disposable income, and interest rates.
“The [housing] imbalances were more acute a year ago than they are today,” CMHC chief economist Bob Dugan told The Globe and Mail in an interview. "We’re seeing some healthy adjustments” in larger cities that had been especially vulnerable in recent years."
However, some experts expressed confusion at how the CMHC deemed Toronto’s market less vulnerable when prices have risen in the past year and little else has changed.
We’re seeing some healthy adjustments” in larger cities that had been especially vulnerable in recent years
“It's worth noting that the last time Toronto house prices were at a High risk of being overvalued according to CMHC was 12 months ago,” said John Pasalis, president of real estate brokerage Realosophy, in a tweet. “What has changed since then for the risk to be reduced to Low? No idea! House prices are up 6%.”
CMHC defines vulnerability as imbalances in the housing market. The rating takes into account overheating, price acceleration, overvaluation and overbuilding to measure vulnerability.
Hamilton also moved from high to moderate risk for the time since the third quarter of 2016, as CMHC said that evidence of overbuilding remains low.
The change brings the two markets in line with Canada's overall moderate vulnerability rating.
Edmonton, Calgary, Saskatoon, Regina, and Winnipeg continued to see a moderate degree of vulnerability in the overall assessment, due to evidence of overbuilding, according to CMHC.
While CMHC gave Ottawa, Montreal, Quebec City, Moncton, Halifax, and St. John's low-risk ratings.
There is now only one market in Canada considered to have a high degree of vulnerability: Victoria. The city has continued to see housing prices rise, even as prices in neighbouring Vancouver have fallen over the past year.