The Canada Mortgage and Housing Corporation released its latest version of the Housing Price and Assessment report last week. This report looks at 15 Canadian urban centres and grades them according to what they consider to be four important risk factors.
These factors are: overheating of housing where demand significantly outpaces supply; acceleration in the growth rate of house prices; overvaluation in the level of house prices; and overbuilding where supply significantly outpaces demand.
Winnipeg was added to the mix in the spring of 2015, and so the August report was the second appearance for this city. Not surprisingly, it was also the second time Winnipeg appeared as a high-risk housing market. This grade is assigned when a city experiences at least two of the four risk factors. In the case of Winnipeg, it was a combined moderate risk in overvaluation and overbuilding, the same as the last report.
Some may worry Winnipeg appears as a high-risk housing market, as does Regina and Toronto; however, further analysis demonstrates this ebb and flow is a relatively common practice.
If we go back a few years, the average resale price for homes was increasing at double-digit rates every year for seven years. There were very few homes on the market and demand was high. By the criteria listed, this would have classified Winnipeg as high risk for accelerated house prices.
Furthermore, from 2010 through 2013, there were a tremendous number of new home starts. These were the highest in more than 25 years. All homes were sold and occupied, but obviously demand significantly outpaced supply thereby necessitating the new home construction. Again, this would have gotten us another high-risk rating.
Therefore, in a period of rapidly increasing prices and unprecedented new home construction, the HPAA report would have classified Winnipeg as high risk in that two of the four factors appeared. It's just a question of whether one wants to be too successful or not successful enough.
In the case of this year's reports, there is no arguing the resale value of homes is not increasing at recent rates. Prices are definitely increasing, just not at the same rates. Prices will continue to increase, too. If Winnipeg is going to grow to one million people in the next 30 years, demand will continue to exist.
Similarly, once the short-term existing supply of multi-family units is satisfied, the demand for new construction will increase again. There haven't been any concerns expressed regarding the need for more single-family detached housing. Again, if we are going to reach one million people, a lot of new inventory must be built.
Therefore, the risk factors listed will continue to come and go. The greatest risk is in not being part of our vibrant housing market as Winnipeg is a great city in which to live.
Mike Moore is president of the
Manitoba Home Builders' Association
