Ottawa’s housing market remains at risk of “continued overheating” despite a recent downward trend in sales activity, the Canada Mortgage and Housing Corp. says.
In its latest quarterly assessment released Tuesday, CMHC said the capital continues to grapple with a lack of supply despite a dip in the number of transactions over the summer compared with the previous year.
“Active listings remain at historic lows, presenting a risk of continued overheating pressures if demand strengthens again with further opening of the economy,” the agency said.
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The World Junior Championships will kick off in Ottawa in December, bringing tens of millions of dollars of economic activity to the city, as well as a chance for local
World Junior Championships set to boost Ottawa’s economy and global reputation
The World Junior Championships will kick off in Ottawa in December, bringing tens of millions of dollars of economic activity to the city, as well as a chance for local
While resale housing transactions fell year-over-year in July and August, average prices kept rising, a situation CMHC said is likely to continue.
Citing the relative stability of the local economy thanks to the region’s high proportion of government workers and thriving IT sector, the agency said Ottawa remains a sellers’ market.
“Employment recovery combined with low mortgage rates and people working from home has continued to support homeownership demand,” the report says, adding the market is still seeing “upward pressure on prices as supply continues to lag demand.”
Rental rebound coming
Meanwhile, CMHC says the city’s rental market slump is likely a “short-term phenomenon” that was triggered by a decline in immigration during the pandemic, fewer out-of-town students attending Ottawa’s universities as classes shifted online and more tenants deciding to buy rather than rent.
“Local intelligence suggests that although vacancies remain higher than pre-pandemic rates, demand for rental units has been improving since March,” the report says, pointing to Ottawa’s “strong employment performance coupled with rising ownership costs” as factors fuelling resurgent demand for rental units.
Nationally, CMHC says Canada’s housing sector moved from a moderate to high degree of vulnerability during the second quarter, with Ottawa, Toronto and Montreal among the markets shouldering the most risks.
The federal housing agency attributed the overall rise in vulnerability to price acceleration and overvaluations across the country and said the shift was largely a reflection of intensified and persistent imbalances in several local housing markets across Ontario and Eastern Canada.
“Housing market activity is very strong, price growth is still very strong and price levels are very high.”
“Even though we’ve seen a little bit of a moderation in some of the housing market statistics in the third quarter, when looking at the second-quarter results … activity was still much stronger than even it is today,” said Bob Duggan, CMHC’s chief economist.
“Housing market activity is very strong, price growth is still very strong and price levels are very high.”
CMHC’s quarterly assessment assigns low, moderate or high vulnerability ratings to the entire country and 15 major cities based on four factors – overheating, price acceleration, overvaluation and excess inventories.
If those factors become imbalanced or risks increase in several areas at once, the agency posits that markets could be more vulnerable to troubles and people could begin struggling with their mortgages.
CMHC’s second-quarter assessment of the Canadian market found moderate degrees of vulnerability when it examined the country’s risks of overheating, price acceleration and overvaluation.
It found a low level of vulnerability linked to the country’s excess inventories rate, but still gave the country a “high” vulnerability ranking overall.
Cottage country boom
In the two prior 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 don’t receive vulnerability ratings but contribute to the national analysis.
“A lot of the movement of people has been from some of the major urban centres to outside the major urban centres, and some of the strongest price growth earlier this year was really experienced in smaller … and rural communities,” Duggan said Tuesday.
CMHC’s individual market assessments for the second quarter showed Ottawa, Toronto, Hamilton, Montreal, Moncton and Halifax have high degrees of vulnerability.
All of those markets were ranked high in the prior quarter, except for Montreal, which was previously assessed as moderate and is seeing overvaluation becoming a more pressing issue.
CMHC kept Victoria, Edmonton and Calgary at the moderate level they were at before, while Vancouver, Saskatoon, Regina, Winnipeg and Quebec City were assessed as having low degrees of vulnerability.
The low ranking was new for Vancouver, which was previously said to have a moderate vulnerability level.
– With additional reporting from the Canadian Press
