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Home prices vulnerable to correction in multiple Canadian cities as values skyrocket, CMHC warns

March 25, 2021 | Posted by: Maurice Kwok

Canada’s housing agency is warning that multiple cities are overheated, overvalued and highly vulnerable to a price correction, as home values rapidly escalate throughout Ontario and the Maritimes.

In its latest housing market assessment released Thursday, Canada Mortgage and Housing Corp said Hamilton, Toronto, Ottawa, Moncton and Halifax are highly vulnerable to instability – its highest warning level.

CMHC warning on escalated house price

Since the start of the pandemic, home prices have jumped over 30 per cent in Ontario’s smaller cities, semi rural regions and vacation locations, as buyers sought more space to work and live.

Areas like Barrie, Niagara and Simcoe have seen price increases in the 30 per cent to 35 per cent range over the 12 months to February. Smaller cities like Tillsonburg, Woodstock and Ingersoll are up over 35 per cent.

Detached houses in Kitchener-Waterloo, Burlington and Mississauga have gone up by a minimum of $100,000 over three months, according to Canadian Real Estate Association (CREA) data. In Milton and Oakville, prices are almost $200,000 more than they were in November.

“Strong housing market activity and price appreciation contributed to the emergence of new imbalances in some markets, or contributed to the worsening of existing imbalances in already vulnerable markets,” said CMHC’s chief economist Bob Dugan in a press release.

The extreme price acceleration has triggered some economists and realtors to say some of Ontario’s real estate markets are in a bubble.

Economists from Bank of Montreal and Royal Bank of Canada have called on policy makers to address the froth market. BMO’s Robert Kavcic has described the market as “boiling” and has suggested finding a way to curb speculative buying and blind bidding, where homebuyers do not know what their competitors are offering and trump the asking price by hundreds of thousands of dollars.

RBC’s Robert Hogue said what is exacerbating the market is that “buyers and sellers expect prices to continue to escalate.” Mr. Hogue said policy makers should put everything on the table including “sacred cows like the principal residence exemption from capital gains tax.”


Source: https://www.theglobeandmail.com/business/article-home-prices-vulnerable-to-correction-in-multiple-canadian-cities-as/

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