CMHC sees balanced market for house prices but some overbuilding

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This article was published 20/02/2020 (2039 days ago), so information in it may no longer be current.

OTTAWA — Winnipeg’s housing prices have fallen in line with incomes this quarter, though there might be too many houses being built in the city, according to federal data released Thursday.

The Canada Mortgage and Housing Corporation has downgraded Winnipeg’s risk of overvaluation from moderate to low, though it still has a concern about overbuilding.

“Overall, we’re seeing balanced market conditions for Winnipeg, compared to some of the other Prairie provinces,” CMHC Winnipeg analyst Heather Bowyer told the Free Press. “We’re seeing a bit of buyers’ market conditions.”

The Crown corporation releases quarterly housing-market assessments for the Winnipeg area, which includes East and West St. Pauls, as well as municipalities with a large share of commuters.

The assessment for February 2020 found house prices that had been higher than disposable incomes last year have trended back to affordable levels.

That’s thanks to low mortgage rates, as well as an uptick in both the population aged 25 to 34 years, as well as jobs that are both full- and part-time, meaning more buyers have more money to work with.

“This caused our overvaluation gap to narrow, and removed the signal of imbalances for this quarter,” said Bowyer.

The CMHC remains concerned about overbuilding in Winnipeg, though the numbers declined from a year prior, and from a peak in 2016.

Having too many homes on the market can impact housing values, while also disincentivizing developers, which can lead to deeper mismatches between demand and supply down the road.

“We are seeing some moderate degree of overbuilding in Winnipeg, so it’s just something to watch, with the level of new construction happening,” said Bowyer, noting homes are staying on the market, while condos face more demand.

Currently, single-detached homes make up almost half the completed houses on the Winnipeg market in late 2019.

Overbuilding could also stem from a healthy rental-vacancy rate in the city, and competition from resold homes steering buyers away from taking new homes.

An oversupply of houses is a concern across the Prairies: the CMHC has deemed it a high risk for Regina, while the housing market in Alberta appears to still be adapting as that province’s economy recovers.

The CMHC is undergoing analysis on economic trends on the housing market nationwide; the Crown corporation should know in about a month the impact of mortgage changes and a global health emergency on housing.

“We’re figuring out the impacts of things like coronavirus (COVID-19) on the economy and housing markets,” said CMHC chief economist Bob Dugan. “We’re in the middle of our analysis right now.”

dylan.robertson@freepress.mb.ca

CMHC Winnipeg housing market analysis for early 2020