Canada Mortgage and Housing Corp. says the spread of affordability issues to real estate markets beyond Vancouver and Toronto will lead it to issue its first “red” warning for the national housing market.
“CMHC has recently observed spillover effects from Vancouver and Toronto into nearby markets,” the federal Crown corporation’s president and CEO Evan Siddall said in a column published in the Globe and Mail. “These factors will be reflected in our forthcoming Housing Market Assessment on Oct. 26. They will cause us to issue our first “red” warning for the Canadian housing market as a whole.”
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“High levels of indebtedness coupled with elevated house prices are often followed by economic contractions,” Siddall said Monday in his article. “The conditions we now observe in Canada concern us.”
New federal changes that went into effect on Monday have been brought in to tighten mortgage rules with the aim of cooling off the country’s overheated housing markets.
Siddall said the new mortgage rules will both reduce the ability of home buyers to borrow and will increase lenders’ funding costs. He added that mortgage rates are expected to rise “modestly in response.”
In a quarterly market assessment released in July, CMHC said evidence of problematic conditions in the Canadian housing market went from weak in April to moderate in July.
CMHC raised its assessment of the Vancouver market from moderate to strong for strong signs of problems, joining Toronto, Calgary, Saskatoon and Regina.
In the July report, CMHC also added Hamilton to Vancouver, Toronto, Saskatoon and Quebec City on its list of markets it considered to be strongly overvalued.
However, not every market in that report was deemed to be at moderate or high risk of problems. CMHC said it saw “weak evidence of problematic conditions” in Victoria, Ottawa, Moncton, Halifax and St. John’s. In fact, the overall assessment for Ottawa eased from moderate to weak, the only market to see that change.
Article source: http://www.cbc.ca/news/business/cmhc-red-warning-housing-1.3808364?cmp=rss