Ottawa’s housing market is still close to boiling point, CMHC says

Ottawa’s housing market remains at risk of “continued overheating” despite a recent downward trend in sales activity, says Canada Mortgage and Housing Corp.

In its latest quarterly assessment released on Tuesday, CMHC said the capital continues to struggle with a shortage of supply despite a decline in the number of transactions over the summer compared to the previous year.

“Active listings remain at historic lows, posing a risk of continued overheating pressure if demand strengthens again with further opening of the economy,” the agency said.

While resale of housing transactions fell year-over-year in July and August, average prices continued to rise, a situation that the CMHC said is likely to continue.

Referring to the relative stability of the local economy thanks to the region’s high share of government employees and thriving IT sector, the agency said Ottawa remains a vendor market.

“Recovery in employment combined with low mortgage rates and people working from home has continued to support the demand for home ownership,” the report said, adding that the market is still experiencing “upward pressure on prices as supply continues to lag behind demand” . “

Rental recovery is coming

Meanwhile, CMHC says the city’s rental market decline is likely a “short-term phenomenon” triggered by a fall in immigration during the pandemic, fewer out-of-town students attending Ottawa universities as classes switched online and more tenants deciding to buy rather than rent. .

“Local intelligence suggests that while vacancies remain higher than pre-pandemic rates, demand for rental units has improved since March,” the report says, pointing to Ottawa’s “strong employment performance combined with rising ownership costs” as factors driving resurgent demand. after rent. devices.

Nationally, the CMHC says Canada’s housing sector moved from a moderate to high degree of vulnerability during the second quarter, with Ottawa, Toronto and Montreal being among the markets carrying the greatest risks.

The federal housing agency attributed the overall increase in vulnerability to price acceleration and overestimations across the country, saying the shift was largely a reflection of intensified and persistent imbalances in several local housing markets in Ontario and eastern Canada.

“The activity of the housing market is very strong, price growth is still very strong and the price level is very high.”

“Although we have seen a slight slowdown in some of the third-quarter housing market statistics when looking at the second-quarter results … activity was still much stronger than it is today,” said Bob Duggan, CMHC’s chief economist.

“Activity in the housing market is very strong, price growth is still very strong and the price level is very high.”

CMHC’s quarterly assessment assigns low, moderate or high vulnerability assessments to the whole country and 15 major cities based on four factors – overheating, price acceleration, overestimation and excess inventories.

If these factors become unbalanced or risks increase in several areas at once, the agency argues that markets may be more vulnerable to problems and people may start struggling with their mortgages.

CMHC’s assessment of the Canadian market in the second quarter found moderate degrees of vulnerability as it examined the country’s risks of overheating, price acceleration and overestimation.

It found a low level of vulnerability linked to the country’s excess inventory rate, but still gave the country an overall “high” vulnerability ranking.

Cottage country boom

In the previous two quarters, Canada’s housing market landed a “moderate” degree of vulnerability, but Duggan warned of pressure from rural areas such as Ontario’s cottage country and the Niagara, Bancroft and North Bay regions, which do not receive vulnerability assessments but contribute to the national analysis.

“Much of the movement of people has been from some of the big city centers to outside the big city centers, and some of the strongest price growth earlier this year was really experienced in smaller … and rural areas,” Duggan said Tuesday.

CMHC’s second-quarter market assessments showed that Ottawa, Toronto, Hamilton, Montreal, Moncton and Halifax have high degrees of vulnerability.

All of these markets were ranked high in the previous quarter, with the exception of Montreal, which was previously rated as moderate and sees overvalue becoming a more pressing issue.

The CMHC kept Victoria, Edmonton and Calgary at the moderate level they were at before, while Vancouver, Saskatoon, Regina, Winnipeg and Quebec City were rated as having low degrees of vulnerability.

The low ranking was new to Vancouver, which was previously said to have a moderate level of vulnerability.

– With further reporting from the Canadian press

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