Toronto’s housing market faces a high risk of a correction as soaring home prices this year have outstripped income growth even as the city is facing a rising supply of new condos, Canada’s federal housing agency warned Thursday.
“In the case of Toronto, strong price acceleration in 2015 reflects a larger share of sales of pricier homes,” Canada Mortgage and Housing Corp. wrote in a new home price forecast that upgraded the city’s risk of a housing downturn from moderate to high. “The rise in house prices has not been matched by growth in personal disposable income, giving rise to a modest risk of overvaluation.”
CMHC said it is monitoring the risk of overbuilding in Toronto’s condo sector given that levels of completed and unsold condo units have “risen significantly” in the last quarter, and now stand above their historical averages.
The federal housing agency also renewed earlier warnings that Regina and Winnipeg are at high risk of a correction, with prices and supply of new homes trending higher than demand and economic conditions would warrant.
Despite being home to Canada’s most expensive real estate, Vancouver’s housing market is at a low risk of a correction, CMHC said, and “demand for housing across the price spectrum is supported by a growing population and growth in personal disposable income as well as by the limited supply of land.”
“First-time home buyers focus on lower-priced options in suburban locales, whereas at the high end of the price spectrum, demand is supported by high net-worth residents or repeat buyers with significant equity in their homes.”
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