(Adds details from report, background)
OTTAWA, April 26 Canada's housing market still
shows strong evidence of problematic conditions, the federal
housing agency said on Wednesday, though it reported signs of
improvement in some markets.
The Canada Mortgage and Housing Corporation (CMHC)
downgraded its overall view of overvaluation to "moderate" from
"strong" and cited six of the Canadian cities it looked at,
compared to eight in its last report in January.
CMHC defines problematic conditions as imbalances in the
housing market where metrics depart significantly from
Nonetheless, Canada's housing market remains divided into
several markets and the major city of Toronto still faces price
acceleration, overvaluation and overheating, CMHC's quarterly
An acceleration in Toronto home prices has caused some to
call the market a bubble and prompted the provincial government
to impose a tax on foreign buyers in Toronto and nearby regions,
among other measures meant to cool the market. Prices in
Canada's largest city were up 33 percent in the year to March.
While declining inventories of homes for sale in the city as
a result of demand outstripping supply is contributing to rising
prices, the acceleration in prices is not explained by
fundamental economic drivers, CMHC said.
Bank of Canada Governor Stephen Poloz, who has said Toronto
prices have become divorced from fundamentals, said last weekend
that the foreign buyers tax should help dampen demand.
Ontario's move mirrors a foreign buyer tax implemented last
year in Vancouver, which had also seen prices surge, as well as
steps taken by the federal government to tighten mortgage
CMHC said there were still strong signs of overvaluation in
Vancouver, noting that the sales market has cooled unevenly as
moderately priced sold quickly and often over the asked price.
Demand in nearby Victoria remained high with the city
showing moderate signs of over heating, CMHC said.
Signs of overvaluation have lessened in Montreal, Quebec
City and Regina, while evidence of over building also declined
to six cities from eight.
(Reporting by Leah Schnurr; editing by Grant McCool)