The Canada Mortgage and Housing Corporation (CMHC) changed its overall rating of vulnerability for the Saskatoon housing market as well as provided an update on Regina.
The federal agency’s Housing Market Assessment (HMA) for the third quarter of 2019, a report that identifies the level of stability in the housing markets of Canadian cities, was released on Thursday.
To capture imbalances in housing markets, the HMA framework assesses four factors: overheating, price acceleration, overvaluation and overbuilding.
Saskatoon Census Metropolitan Area (CMA): low degree of vulnerability
The overall degree of vulnerability was downgraded from moderate to low in Saskatoon. The housing market hasn’t received this rating since the first quarter of 2015, according to the report.
CMHC said housing market vulnerabilities related to overbuilding have now diminished sufficiently, as both the inventory of completed and unsold homes and the purpose-built apartment vacancy rate have moved below their respective critical thresholds.
Inventories of unsold new homes consistently declined since early 2016 as builders scaled back on the number of new projects being initiated each year for the past four years as economic conditions softened, according to the report.
Meanwhile, CMHC said steady population growth driven in large part by positive international migration, combined with a slower pace of new rental construction supported a significant decline in the apartment vacancy rate from 8.3 per cent in 2018 to 5.7 per cent in 2019.
As a result of the unwinding of imbalances related to overbuilding, the overall assessment moved to exhibit a low degree of vulnerability.
“The Saskatoon housing market now exhibits low evidence of overbuilding as a result of both the inventory of completed and unsold homes and the apartment vacancy rate moving below their respective critical thresholds,” CMHC senior analyst Taylor Pardy said in the statement.
“Evidence of overheating, price acceleration and overvaluation also remain low as of Q3 2019.”
Regina CMA: moderate degree of vulnerability
The overall assessment of a moderate degree of vulnerability was maintained in the Regina housing market due to evidence of overbuilding, according to the report.
While a sharp pullback in housing starts helped keep the inventory of completed and unsold units per 10,000 population below the HMA framework’s critical threshold in the third quarter of 2019, CMHC said this indicator was still above the threshold in two of the past four quarters.
Therefore, the persistence of this indicator still signalled overbuilding imbalances, according to the agency.
Furthermore, CMHC said the apartment vacancy rate in the Regina CMA was 7.8 per cent in October 2019, statistically unchanged from 7.7 per cent in October 2018, and still above the critical threshold for overbuilding.
“Overall, the Regina housing market continues to exhibit a moderate degree of vulnerability due to overbuilding,” CMHC senior analyst Goodson Mwale said in a statement.
“The persistence of higher inventories over the past year together with an elevated rental vacancy rate has led us to maintain our high rating on overbuilding.”
The agency said there was evidence of overvaluation, overheating and price acceleration remained low in Regina.