New housing market assessment released by Canada Mortgage and Housing Corporation suggests strong evidence of problematic conditions in Calgary.
The report considered four factors to assess the evidence of problematic housing market conditions: overheating, acceleration in the growth of house prices, overvaluation and overbuilding.
The report states that Calgary is showing strong evidence of problematic conditions. There continues to be moderate evidence of overvaluation as economic fundamentals have weakened. Low oil prices have weighed down activity in the energy sector, which has slowed employment and income growth in the province. Net migration has been reduced as migrants and job seekers move to regions with more favourable labour market conditions. The evidence for overbuilding in Calgary has moved to a moderate level. The vacancy rate has risen due to a decline in rental demand and more units added to the purpose-built rental market. This combined with more competition from the secondary rental market, has pushed up the vacancy rate to an elevated level. According to CMHC residential vacancy reached 5.3 per cent in October, compared with 1.4 per cent a year earlier.
At the national level, moderate overvaluation is still observed, meaning house prices remain higher than levels consistent with personal disposable income, population growth and other factors. The Calgary Real Estate Board earlier this month predicted the annual benchmark price for a detached home in Calgary would fall 3.2 per cent this year. CHMC has said it expects 2016 prices will be flat following a second-half rebound.