Ottawa’s housing market faces only a low risk of market correction, according to a Canada Mortgage and Housing report released Thursday.
The low risk in the capital “reflects the combination of strong growth in house prices in the last few years and modest gains in personal disposable income,” the report said.
It warned builders need to continue to manage inventories to ensure condominium units actually sell once they are built. Still, it said “demand for condominium rental accommodation remains strong,” adding it expects unsold inventory should be absorbed throughout the year.
While the risk may be low in Ottawa, the CMHC said the same cannot be said for markets like Toronto, Winnipeg and Regina.
The report said a rapid increase in home prices this year and overvaluation are responsible for the high level of risk in Toronto. Back in April, the national housing agency had pegged Toronto as having only a moderate risk of a correction.
CMHC also said Winnipeg faces a high level of risk due to overvalued home prices and overbuilding.
In Regina, rapid price growth, overvaluation and overbuilding, especially of condo units, are responsible for the high risk rating, it said.
CMHC's house price analysis and assessment aims to identify potential risks in Canadian real estate by evaluating economic, financial and demographic factors.
The agency uses four factors to identify the level of risk present in regional housing markets: overheating of demand, accelerating price growth, overvaluation of prices and overbuilding.
“Nationally, CMHC continues to detect a modest risk of overvaluation,” Bob Dugan, CMHC's chief economist, said in a statement.
“However, our overall assessment of the risk of problematic conditions varies from centre to centre due to regional differences in housing markets. Imbalances in local housing markets could be resolved with further moderation in house prices or improving economic conditions.”
-with files from the Canadian Press