Like Summer Weather, Vancouver Housing Market “Overheating”

Yet more “evidence of problematic conditions” in local real estate market, says quarterly CMHC analysis
Joannah Connolly
July 26, 2017

As the mercury soars in Greater Vancouver, so Vancouver home prices and sales-to-listings ratios rise – creating continued “problematic conditions” for the real estate market, according to the Canada Mortgage and Housing Corporation (CMHC).

In its latest quarterly Housing Market Analysis for the Vancouver Census Metropolitan Area (CMA), which examines 2017’s first quarter, the CMHC said it “detected strong evidence of overvaluation in Metro Vancouver’s housing market in the first quarter of 2017. Growth in economic fundamentals, such as population and wages, cannot fully account for the recent run-up in in home prices since the third quarter of 2015.”

The report added, “Population and wage growth, along with record-low mortgage rates, continue to be supportive of house price growth. In particular, job creation has been strong in the Vancouver CMA… However, the HMA framework suggests that price levels have exceeded those supported by these strong local fundamentals. Current price levels appear stretched both relative to income and across housing types.”

The quarterly Housing Market Analysis (HMA) assesses real estate markets across Canada, using four key risk factors: overheating, when demand for homes in the region outpaces supply; sustained acceleration in house prices; overvaluation of house prices, in comparison to levels that can be supported by economic fundamentals; and overbuilding, when the inventory of available housing units is elevated.

Even though only one of the four risk categories saw “strong evidence of problematic conditions” in Vancouver CMA, this was enough to give Vancouver a high overall risk rating – along with Victoria, Toronto, Hamilton and Saskatoon.

CMHC Housing Market Risks Table July 2017
Source: CMHC

Despite the high demand and low supply of currently available homes for sale in Vancouver, the CMHC detected only “moderate evidence of overheating during the first quarter of 2017.”

It added, “The sales-to-new-listings ratio has increased since the previous report, leading to the detection of overheating. Conditions in different segments of the Vancouver market have further diverged since the beginning of the year.”

CMHC Sales to Listings Ratio July 2017

Source: CREA

The HMA also described “moderate evidence of price acceleration in Metro Vancouver’s housing market for the fifth consecutive quarter” – reflecting the recovery of home prices during 2017’s first quarter, following the decline in the second half of 2016.

The report added, “While average prices did decline on a month-over-month basis in the second half of 2016, the decline was primarily driven by a slowdown in the single-detached market.”

CMHC HMA Vancouver Prices July 2017

Source: CREA/CMHC

The CMHC continued to find scant evidence of overbuilding in the Greater Vancouver housing market.

“Low new home inventories and low vacancy rates in the primary rental market point to weak evidence of overbuilding,” the HMA said.

Download the full CMHC Housing Market Analysis for Vancouver, Victoria and all of Canada

Joannah Connolly
Joannah Connolly is editorial director of Glacier Real Estate, Glacier Media's real estate division. Joannah writes and curates real estate news for Glacier Media's local newspaper websites, including the Vancouver Courier, North Shore News, Burnaby Now, Tri-City News and others. She also oversees editorial content in Real Estate Weekly Homes, West Coast Condo, Western Investor and Glacier's special real estate publications. A dual Canadian-British citizen, Joannah has 22 years of journalism and editing experience in Vancouver and London, with a background in construction, architecture, healthcare and business media. Joannah has appeared on major local TV outlets as a real estate commentator, has moderated and spoken on various industry panels, and spent two years hosting the Real Estate Therapist radio show on Roundhouse Radio.