(Bloomberg) -- Recent rule changes by the Canadian government to tighten mortgage lending appear to be having the desired effect of bringing the country’s real estate market more into balance.
The federal housing agency lowered its assessment of the overall vulnerabilities in the national market to “moderate,” from “high,” according to a report Thursday from Ottawa. Canada Mortgage and Housing Corp. cited evidence of easing price acceleration for the country as a whole, with prices in Toronto and Vancouver moving closer to levels supported by fundamentals.
“After being rated ‘high’ for 10 straight quarters, the overall degree of vulnerability for Canada as a whole has changed to ‘moderate,’ the agency said in the report.
Home sales and prices have slowed in Canada after regulators imposed stress tests on new mortgage lending last year to mitigate risks of a crash. Since then, banks including Toronto-Dominion Bank and Canadian Imperial Bank of Commerce, as well as realtor groups and home builders, have argued the rules should be eased, saying they are punishing first-time buyers.
The Real Estate Board of Greater Vancouver reported Thursday that the benchmark home price fell 8.5 percent in April from a year ago while sales were down 29 percent. Toronto reports data tomorrow.
CMHC said its assessment of overvaluation in Vancouver has changed to moderate from high , and the “conditions of overheating are easing as well.” Vancouver, Toronto, Victoria, British Columbia, and Hamilton, Ontario continue to see a “high degree of vulnerability” in the overall assessment, “but house prices are moving closer to levels supported by housing market fundamentals” in those cities.
That said, CMHC flagged “evidence of overheating” in the Montreal and Moncton, New Brunswick resale markets. Also, vulnerability remains “moderate” for the western cities of Edmonton, Calgary, Saskatoon, Regina and Winnipeg due to “evidence of overbuilding” in these cities.
The report is based on data through the end of 2018.
