The Canada Mortgage and Housing Corp. says it no longer rates the country’s housing market as highly vulnerable after an overall easing of price acceleration.
The federal agency said in a report Thursday that it rates the overall market at moderate after 10 consecutive quarters at the highly vulnerable rating, though some cities remain at elevated risk.
“The state of the national housing market has improved to moderate vulnerability,” CMHC chief economist Bob Dugann said in a statement.
“Even though moderate evidence of overvaluation continues for Canada as a whole, there has been improved alignment overall between house prices and housing market fundamentals in 2018.”
The inflation-adjusted average price decreased 5.4 per cent in the last quarter of 2018 from the same period a year earlier.
CMHC said that while house prices in Vancouver, Victoria, Toronto and Hamilton moved closer to sustainable levels, it continues to see a high degree of vulnerability in those markets.
The agency noted that while Vancouver remains rated at highly vulnerable, evidence of overaluation has changed from high to moderate.
The biggest cities in the Prairies remain at a moderate degree of vulnerability, while Ottawa, Montreal, Quebec City, Moncton, Halifax and St. John’s are rated as low vulnerability.
The report based its vulnerability assessment on several criteria including price acceleration, overvaluation, overbuilding, and overheating.
Price acceleration has eased nationally after the federal government’s mortgage stress tests came into effect in 2018 and raised the bar for qualifying for a mortgage, the report said.
“Tighter mortgage rules, likely reduced demand for housing, and contributed to the observed decline of house prices.”
CMHC also noted that inflation adjusted personal disposable income dropped by 1.2 per cent to reduce buying power, but that was partially offset by a young-adult population that grew by 1.9 per cent to continue to increase the pool of potential first-time homebuyers.
The Canadian Press