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Canadian housing prices high

Nov. 24, 2014, Ottawa — Results from Canada Mortgage and Housing Corporation's (CMHC) House Price Analysis and Assessment (HPAA) framework indicate that overall, housing markets in Canada remain broadly consistent with underlying demographic and economic factors such as employment and interest rates. Nevertheless, a modest amount of overvaluation is observed, meaning that house prices are slightly higher than what the underlying factors would suggest.

"CMHC is committed to expanding the availability of information about Canada's housing markets. This knowledge will ultimately contribute to a stronger housing finance system," said Evan Siddall, President and Chief Executive Officer of CMHC. "The HPAA adds to CMHC's efforts to identify, and where appropriate, fill significant data and information gaps."

The HPAA is a comprehensive framework that is designed to assess housing market conditions by taking into consideration the economic, financial and demographic drivers of housing markets. The use of multiple indicators of housing conditions, which incorporate various data sources and prices measures, provides a robust picture of overall housing market conditions. The results released today include those for the national market as well as 8 Census Metropolitan Areas (CMAs) — Vancouver, Calgary, Edmonton, Toronto, Ottawa, Montreal, Québec and Halifax.

"At the national level, other than a modest amount of overvaluation, we do not detect the presence of other risk factors such as overheating, price acceleration, and overbuilding," said Bob Dugan, CMHC's Chief Economist. "Risk of overvaluation is most evident in Montreal and Quebec, but the trend is improving. A modest risk of overvaluation is also present in Toronto, Calgary and Halifax. Across the 8 CMAs examined, there is no overheating or acceleration."

"There is however a cautionary note with respect to overbuilding in Toronto and Montreal. The number of units under construction is elevated in these centres. This could develop into overbuilding if these units are completed but not sold. To mitigate this risk, builders will need to hit the appropriate balance in channeling new demand between units that are currently under construction but not sold and units that are in the planning stage," noted Mr. Dugan.

Additional information and results for the 8 CMAs are available in the attached backgrounder. As well, the full text of this article is available in a special edition of Housing Now — Canada Edition.

This is the first phase of information being released as part of the HPAA Framework. Additional, market-specific analysis will be released as available, with future reporting taking place on a semi-annual basis starting in Q1 and Q3 of 2015. Updates will also be available as part of CMHC's Housing Market Outlook which will be published in Q2 and Q4 in 2015.

As Canada's authority on housing, CMHC continually works to increase the amount of available data and analysis on the housing market.

CMHC draws on more than 65 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable housing solutions. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.