Vancouver Market at “Low Risk” of Overvaluation: CMHC

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Despite high property prices and being oft-cited as Canada’s least affordable housing market, Vancouver real estate is described as “low risk” of overvalution by a Canada Mortgage and Housing Corporation report released November 24.

In its first House Price Analysis and Assessment Framework, which looked at eight major urban centres and which the CMHC aims to expand in future, the association measured house prices against four risk factors: overheating demand, price acceleration, overvaluation and overbuilding.

Vancouver was rated as low-risk in all four categories, including overvaluation, despite its lack of affordability as a ratio of average incomes.

It stated, “The level of home prices in Vancouver is supported by local growth in personal disposable income and long-term population growth.” This position supports the CMHC’s previously published forecast that Vancouver’s housing market will hold steady over the next two years.

The report found that Canada’s national housing market is also generally “low risk” – although it cautioned that there was some “moderate risk of overvaluation” in some urban centres including Toronto, where income rises have not matched house price growth.

However, chief economist Bob Dugan warned that the “very positive assessment” is based on a “backward-looking” examination of the Vancouver, Toronto, Calgary, Edmonton, Ottawa, Montreal, Quebec City and Halifax markets.

“When we do this kind of analysis … it assumes that the world of the future will unfold much like it did in the past and, of course, there are dangers about driving while you are looking in the rear-view mirror,” said Dugan.