Economic fundamentals don’t explain the country’s escalating housing prices and that’s indicative of vulnerability, says the Canada Mortgage and Housing Corporation.
The crown corporation’s Housing Market Assessment (HMA), which analyses overbuilding, overvaluation, price acceleration and overheating, noted that income and employment, among other factors, should be driving price growth in some markets, but they aren’t, and a flurry of activity across the country resulted in an upsurge of sales last quarter.
According to the HMA, Vancouver, Toronto and Montreal are only moderately vulnerable, but Hamilton and Moncton have moved from a moderate to a high degree of vulnerability, with overvaluation and price acceleration evident in both markets.
However, Joe Ferrante, broker of record Royal LePage State Realty in Hamilton, says the city’s market has been opportune for first-time buyers, many of whom have flocked to The Hammer from the GTA.
“People are actually moving out of central Hamilton to the suburbs of Ancaster, Stoney Creek and Dundas, but those spots are also being filled by first-time buyers from the GTA,” he said. “A lot of people are simply walking out of 600 sq ft condos in Toronto and picking up single-family homes somewhere in central Hamilton with a backyard and lots of room.
“You can comfortably get in at the $500,000-600,000 range in Hamilton. If you move here from the GTA, you find a ton of value. We’ve seen a lot of move-up buyers who have had to work from home and realized there are deficiencies in their homes and they decided to upgrade.”
The Q3 HMA is a marked contrast to the assessment CMHC released in Q2—which, unsurprisingly, revealed a national housing market reeling from COVID-19-related lockdowns—because torrid sales have outpaced new listings, putting downward pressure on inventory and creating an imbalanced housing market.
“Although the unprecedented income support from governments provided temporary relief, the COVID-19 crisis negatively affected the level of permanent disposable income available to households,” Bob Dugan, CMHC’s chief economist, said in the report. “Along with the weakening of other drivers of the housing market, overvaluation imbalances increased further or started to emerge in several markets in the third quarter of 2020.”
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