Canada's housing market remains at moderate degree of vulnerability

  9/21/2020 |   SHARE
Posted in Canadian Housing Market by Sheru Asnani | Back to Main Blog Page


Weakening housing market fundamentals and an increase in average overvaluation estimates in the second quarter of 2020 have led to Canada's housing market retaining a moderate degree of vulnerability. This analysis is according to the Canada Mortgage and Housing Corporation (CMHC) Housing Market Assessment (HMA) released today.

"Housing market activity across the country slowed significantly between the first and second quarters of 2020 due to the effects of COVID-19," said Bob Dugan, CMHC's chief economist. "However, the sharp pullback in new listings and resulting low levels of inventory maintained some pressure on observed house prices in the local housing markets that were seeing strong activity prior to the crisis."

Results are based on data as of the end of June 2020 (annual rental apartment vacancy rates are from October 2019) and market intelligence up to the end of August 2020. This national report provides the housing market assessment at the national level and detailed results for 15 Census Metropolitan Areas (CMAs).

The last HMA was released in February, shortly before the COVID-19 pandemic led to significant and rapid changes in the economy. Due to the swift evolution of the situation and unprecedented level of uncertainty, the HMA was suspended until relevant and timely data were available again.

To ensure timely information, the overvaluation framework in this edition relies on preliminary estimates of some fundamental drivers of the housing market in the second quarter of 2020. Final calculations and ratings for overvaluation will be presented in the next HMA as finalized data for these fundamental drivers becomes available. The attached backgrounder also provides additional information.


While the HMA framework still focuses on the same key factors in assessing the degree of housing market vulnerability (overheating, price acceleration, overvaluation and overbuilding), there exists a wider range of housing market vulnerabilities in the context of the COVID-19 crisis. The HMA nonetheless remains useful to keep the pulse of housing markets in Canada and to continue monitoring potential imbalances.


  • The COVID-19 pandemic has affected all regions of the country.
  • Prior to the second quarter of 2020, Vancouver and Toronto were experiencing a general unwinding of housing market imbalances.
  • Vancouver and Toronto saw an increase in observed house prices in the second quarter of 2020 despite the COVID-19 driven decline in their estimated fundamental house prices. This has led to an increase in average overvaluation estimates in both housing markets.
  • The Ottawa, Moncton, and Halifax housing markets are all now assessed at an overall moderate degree of vulnerability.
  • Ottawa, Montréal, Moncton, and Halifax entered the second quarter of 2020 with emerging imbalances in their respective housing markets.
  • Observed house prices in all four CMAs had been growing prior to the onset of COVID-19 and continued growing in the second quarter, despite the general weakness in housing market fundamentals.
  • This has led to the detection of moderate evidence of overvaluation in Moncton and Halifax while a sustained increase in the rate of house price growth has led to the signaling of price acceleration in Ottawa and Montréal.
  • The COVID-19 pandemic and downward pressure on oil prices further aggravated Edmonton and Calgary's recent economic challenges.
  • House prices in these Prairie centres fell in the second quarter of 2020. The rate of decline is below what can be explained by housing market fundamentals alone. This has led to an increase in average overvaluation estimates in both housing markets between the first and second quarters of 2020.
  • Evidence of overbuilding that was first detected in 2015 is still present in both markets.

CMHC issues the HMA on a quarterly basis to provide Canadians with expert and impartial insight and analysis, based on the best data available in Canada. The report provides a comprehensive view of housing market vulnerabilities and identifies imbalances. The HMA is not intended to identify long-term challenges related to housing affordability.

The HMA is an analytical framework intended to detect evidence of current or emerging imbalances across housing markets in Canada. The HMA considers four key factors: overheating, price acceleration, overvaluation and overbuilding. As the number of intense and persistent signals of imbalances increases, the degree of vulnerability of the housing market becomes higher.

The HMA intends to help detect vulnerable housing market conditions in historical data, such as the house price bubble Toronto experienced in the late 1980s and early 1990s.The ability of the HMA to detect vulnerabilities relies on the assumption that historical relationships between prices and fundamental drivers of housing markets have not changed.

The HMA is not a housing affordability assessment. Affordability is a multi-faceted challenge and may differ for different segments of the population. The HMA aims to assess whether there are risks from the overall housing market that could ultimately affect financial stability. With the HMA, CMHC offers information and analysis that can help Canadians make informed decisions and contribute to an orderly adjustment of housing market imbalances.

Source: Canada Mortgage and Housing Corporation

Canadian Housing Market, Canadian Real Estate Market Outlook, CMHC

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