Photo: James Bombales

The Canadian real estate market is supposed to be in the midst of a soft-landing, as the effects of a new mortgage stress test and an interest rate hike begin to take shape. But according to one industry organization, Canadians shouldn’t let their guards down just yet.

“Our market assessment continues to show a high degree of vulnerability for the housing market at the overall national level, because of the combination of price acceleration and overvaluation,” writes Canada Mortgage and Housing Corporation chief economist Bob Dugan, in a statement released today.

According to Dugan, some centres in Ontario and BC remain “highly overvalued,” leaving the Canadian housing market at a “high degree of vulnerability.”

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CMHC lists Toronto, Hamilton, Vancouver and Victoria as local markets that are particularly vulnerable to price acceleration and overvaluation.

The organization defines vulnerability as imbalances in the housing market, which occur when overbuilding, over-evaluation, overheating and price acceleration depart significantly from historical averages.

“While house price growth has slowed, house price levels remained high relative to underlying economic fundamentals such as income and population growth [in Toronto],” writes CMHC Toronto principal market analyst Dana Senagama, in a statement.

It’s worth noting that CMHC’s assessment has not changed much over the last few months. In its last vulnerability assessment in October, Victoria, Vancouver, Hamilton and Toronto were all identified as vulnerable markets.

As for markets with low vulnerability? CMHC identified overbuilding as a potential issue in some markets in western Canada, while markets in eastern Canada fared better and were considered to have low vulnerability.

“House prices in Calgary, Edmonton, Saskatoon and Regina appear broadly in line with fundamentals, but strong evidence of overbuilding is still observable,” reads the report from the CMHC. “[Meanwhile,] Manitoba, Quebec and Atlantic Canada housing markets were rated as showing low vulnerability.”

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