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Monday, November 2, 2015

Brokers react to overvaluation report

CMHC released its Housing Market Assessment, detailing the health of various housing markets, and one broker finds fault in the methodology.

“I find that the summary of each of the cities and provinces doesn’t [fully capture] what their individual risks are,” Anthony Cirelli, a broker with Real Mortgage Associations, told MortgageBrokerNews.ca. “They compare Calgary, Vancouver, and Toronto using the same criteria but they all have different risks.”

Cirelli calls the study cookie cutter, and one that oversimplifies a solution.

“The part that really got my goat was when CMHC said, ‘Problematic overvaluation conditions in local housing markets could be resolved by moderation in house prices and/or improving economic conditions,’” Cirelli said.

The crown corporation fell short of providing an actual concrete solution to address housing risks, according to Cirelli.

“CMHC is avoiding the obvious solution, which is to increase rates,” he said.

And brokers have already expressed confusion with the fact that Calgary was left off the list.

“For them to say there is no issue in Calgary … I think they’re masking the problem in Calgary,” Cirelli said. “Calgary has had a 40% drop in resale activity and investment has been on the decline.

The study, released Thursday, points to “strong evidence” of problematic conditions in Toronto, Winnipeg, Saskatoon, and Regina.

The crown corporation fell short of quantifying these risks, however.

According to the report, Toronto’s analysis is a reflection of price acceleration and overvaluation; the other markets show evidence of overvaluation and overbuilding.

The analysis looked at the national housing market as well as 15 major metropolitan areas -- Vancouver, Victoria, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Toronto, Hamilton, Ottawa, Montréal, Québec, Moncton, St. John’s and Halifax.

MBN

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