Despite having the highest residential real estate prices in the country, Vancouver’s housing market is not overvalued and is very unlikely to see a correction, according to the Canada Mortgage and Housing Corporation (CMHC).
The CHMC’s latest House Price Analysis and Assessment report, published April 30, considers the “incidence, intensity and persistence” of four key risk factors that suggest potentially problematic housing market conditions.
Those factors are:
- overheating of demand in the housing market (demand significantly outpacing supply);
- acceleration in the growth rate of house prices;
- overvaluation in the level of house prices; and
- overbuilding of the housing market (supply significantly outpacing demand, which can reflect excess new construction and/or a decline in demand for existing homes).
The CHMC said that in Vancouver “none of the individual risk factors are currently detected”.
“Despite high Vancouver home prices, demand for housing across the price spectrum is supported by a growing population and growth in personal disposable income,” said the report.
“First-time home buyers focus on lower-priced options in suburban locales. At the upper end of the price spectrum, high-net-worth residents, and those who have gained equity in their homes, are more likely to buy single-detached homes in central locations and luxury property.”
The report added that high house prices do not necessarily equate to overvaluation. “Overvaluation is present in a housing market when house prices remain significantly above the level warranted by fundamental drivers such as land supply, income, population, and interest rates … For example, average prices in Vancouver exceed the national average, although no overvaluation is detected. In comparison, average prices in Québec are below the national average and overvaluation is detected.”
The CHMC said that overvaluation in Regina and Winnipeg means that those markets are at a high risk of correction.