Thanks to Hawk for posting the CMHC Housing Market Assessment which concluded that there is absolutely nothing abnormal about our housing market, and there is no evidence for overvaluation, overheating, overbuilding, or price acceleration. In fact, according to the CMHC we’re the only city they looked at that had absolutely no evidence of any problematic conditions.
Rejoice oh Victoria buyers! The market where you are being outbid on every property is perfectly ordinary and nothing at all to be even remotely concerned about. All time sales records and $200,000 over asks are likely only figments of your imagination.
How do we reconcile the CMHC’s report with the fact that Victoria is in the same group as Vancouver and Toronto while the rest of the country languishes?
Let’s take a look at their report. Before we get into the data itself, we have to look at the dates, which are being presented in a way that is wildly misleading. In the summary table above (from the National Post), it says that it is based on “comparison between January 2016 and April 2016” which would indicate it is up to date. I’d blame the media but the report itself also highlights when it was released (April 2016) rather than what it actually covers (Q4 2015). Only if you dive into the report we see that it is actually based on “data as of the end of December 2015 and local market intelligence up to the end of March 2016”. I understand it takes time to write reports, but it seems more than a little misleading to represent your data as current when it isn’t, especially when it doesn’t include the spring market. Not sure what their local market intelligence consists of but given the author of the Victoria report lives in Vancouver, I’m going to say maybe not as local as you might expect.
The first category they consider is overheating, which they define as a Sales/List ratio of over 80%. According to their chart we are approaching this threshold with a current value of 71% but we aren’t exceeding it yet. I would say that given we are at the high end of historical values and near the threshold with a strong positive trend that should qualify as some evidence of overheating, but apparently not.
More interestingly they use a “seasonally adjusted” measure of sales/list which always makes me suspicious. The only seasonal adjustment I trust is 12 month averaging as everything else is subject to manipulation, intentional or not. I think it’s pretty clear from the value of our Sales/List ratio and it’s trajectory that we are clearly headed into overheated territory. Combine that with real local intelligence like Just Jack showing that well over half of detached properties in the core are going over ask and it seals the deal.
The next category is price acceleration which they again say there is weak (aka no) evidence for. Again the outdated data from 2015 sinks them here, combined with suspect measures like seasonally adjusted prices. I’d say one look at the price trajectory for single family homes makes it pretty clear we are seeing significant price acceleration here.
They do acknowledge that single family house prices are accelerating quickly, but handwave this away by saying new units under construction will surely compensate for the price runup.
On to overvaluation. While I agree that we are not yet overvalued based on affordability measures, the CMHC makes a pretty weak argument here. They don’t have a measure of affordability, they just say that low rates, population growth, and an increase in full time employment means that fundamentals support prices. The employment growth is interesting, but looking at their chart, I don’t see any sustained trend there. We had a similar runup in employment in 2012.
In the area of overbuilding, the CMHC rightly concludes there is no cause for concern at the moment. With starts at normal levels and demand for rentals high, the market can easily absorb new construction currently in the pipeline.
This report is interesting and gives me some ideas for more things to track. The major flaw with it is that they advertise their framework as something that “may provide an early indication of potentially problematic housing market conditions” (count the weasel words). When your report is obsolete as soon as it is released it is a bit difficult to provide an early indication of anything. Real estate generally moves slowly so you can often get away with outdated information. However the thing that is common in problematic market conditions is rapid change. Looking at data that is almost 4 months old isn’t going to help identify those.