Canada's national housing agency rang more alarm bells about Vancouver's real estate sector after it released a report Wednesday saying there is now strong evidence of problematic conditions in the city.
In a quarterly housing market assessment released Wednesday, Canada Mortgage and Housing Corp. increased its risk rating for Vancouver to its highest level for the first time since it began releasing the reports last year.
The housing agency said it is seeing evidence of an overheated market, which occurs when demand outstrips supply, and price acceleration in the city. Previously, it had said there was strong indications of overvaluation as prices for single detached homes have soared higher than what economic fundamentals can support.
Robyn Adamache, a principal market analyst for CMHC, said there have been signs of overheating in Vancouver's real estate market for some time, but the agency didn't want to prematurely signal that warning.
"We had been waiting for a couple of quarters of evidence to be able to make that call," Adamache said.
"And part of what contributed to making that call this quarter is that we have started to see the multi-family sector, including both townhomes and apartments, also moving into overheated conditions in terms of the sales to new listings ratio, whereas before it was only on the single-family side."
CMHC's assessment comes as the B.C. government plans to implement several measures, including a 15 per cent tax for foreigners purchasing property, in an effort to cool down house prices that are among the highest in North America.
CMHC chief economist Bob Dugan said it's too early to say what effects the tax will have on Vancouver's real estate market.
"This is an announcement that came out very recently," Dugan said. "We haven't had time to update any forecasts to take this tax into account. There are a lot of unknowns."
Earlier this month, the Real Estate Board of Greater Vancouver reported that the benchmark price for all residential properties in Metro Vancouver was $917,800 in June, a 32 per cent jump from the same month last year.
CMHC's report Wednesday also said that evidence of problematic conditions in Canada's housing market as a whole has risen from weak to moderate, although Dugan cautioned against jumping to any conclusions based on the national figures.
"I wouldn't spend a lot of time focusing on the Canada-wide numbers," Dugan said.
"When you get down to the CMAs (census metropolitan areas), there's a large variation from one place to the next. So really what you have to look at is where you live or what your part of the country looks like."
Toronto, Calgary, Saskatoon and Regina all showed strong evidence of problematic conditions, according to the report, while real estate markets in Edmonton, Winnipeg, Hamilton, Montreal and Quebec have exhibited moderate evidence of imbalances.
The housing agency says imbalances occur when overbuilding, overvaluation, overheating and/or price acceleration depart significantly from historical averages.
Overall evidence of problematic conditions has decreased in Ottawa since the previous CMHC housing market assessment in April.
The assessment is intended to be an early warning system to alert Canadians about problematic conditions developing in the country's real estate markets. It covers 15 regional markets and the national housing market as a whole.
