Hamilton’s housing market is showing the first troubling signs its home prices may be too high and the market is overheating.
In a new study, Canada Mortgage and Housing Corporation warns that while the risk remains low, the continued migration of housing refugees from Toronto and area is having an impact.
“The limited supply of single-detached homes in established locations in the Greater Toronto Area resulted in higher prices which in turn encouraged some buyers to move to Hamilton,” the agency reported in its latest assessment of housing prices across the country. “This migration pattern contributed to strong demand of existing homes causing a modest risk of overheating.”
CMHC’s House Price Analysis and Assessment framework, designed to “detect the presence of problematic conditions in Canadian housing markets” tries to measure the threat of markets overheating, overbuilding, suffering price rapid price rises or are becoming overvalued.
The study also noted local prices are rising faster than employment and incomes, raising the risk of overvaluation, but adds improvements in jobs and wages and easing price growth should control the overvaluation threat.
For Abdul Kargbo, CMHC’s market analyst for Hamilton: “It’s really Economics 101. The higher the demand, the higher the price. Hamilton is consistently a seller’s market because there are more people buying than selling. We assess that as a possibly problematic situation.”
He added that as the local employment picture brightens and the numbers of houses listed for sale improves, the rise in local prices should ease.
“We expect that the acceleration of prices is going to slow,” he said. “For the most part, what’s happening is simply the dynamics of supply and demand.”
CMHC’s conclusions didn’t surprise the heads of the local home-builders’ and real estate associations.
“We’ve been dealing with this trend for years,” said Suzanne Mammel, executive officer of the Hamilton-Halton Home Builders’ Association. “I don’t see this trend as anything to worry about. This isn’t a troubled market in any way, shape or form.”
On the building side, CMHC figures to the end of June show 508 units started in 2015 compared to 438 for the same period last year. The critical numbers — houses finished but not absorbed — fell to 42 from 56 for the first half of 2014.
Donna Bacher, president of the Realtors Association of Hamilton-Burlington, said statistics show rising prices across the area, but “we still have lots of affordable stock in the city.”
On the resale side of the ledger, the latest statistics from the realtors’ group show 1,624 properties sold in July and 1,968 were listed for sale. That’s a 4.4 per cent increase in sales and a 13.7 per cent drop in available listings over the same period last year.
The average price of a home in the area rose almost six per cent, to $433,465, compared to July 2014.
This is the first time Hamilton has been included in the House Price Analysis and Assessment study.
The overall assessment of risk detected by the framework is high for Toronto, Winnipeg and Regina. In Toronto, the high overall risk reflects a combination of price acceleration and overvaluation. The high level of risk in Winnipeg reflects risks of overvaluation and overbuilding, while in Regina it reflects price acceleration, overvaluation and overbuilding, particularly of condominium apartments.
The results released today include those for the national market as well as 15 Census Metropolitan Areas (CMAs): Vancouver, Victoria, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Toronto, Hamilton, Ottawa, Montreal, Quebec, Moncton, St. John’s and Halifax (with Victoria, Hamilton and Moncton being added from the previous report released in April).
Nationally, the study found “modest overvaluation … meaning house prices are slightly higher than levels consistent with personal disposable income, population growth and other factors.”
**This article and photo are courtesy of the Hamilton Spectator**
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