According to senior analyst Kelvin Ndoro, the main driver of Halifax’s change from a vulnerability rating of “low” to “moderate” was CMHC’s assessment of the market overvaluation. “This meant that house prices were higher than the levels supported by the fundamentals of the housing market,” Ndoro said.
These fundamentals include the amount of disposable income in a given city, the level and increase in population, interest rates and employment.
In other words, house prices in Halifax go beyond what is considered affordable for locals.
According to CMHC, average house prices in the MLS real estate agent system increased 19% in the third quarter of 2020 compared to 2019.
Overvaluation is one of four indicators CMHC uses to assess the state of a city’s housing market, and two of the others are also rising slightly.
“On top of that, the other two indicators of price acceleration and overheating were slightly below the threshold that would signal vulnerability,” Ndoro said.
In February 2020, CMHC assessed Halifax’s vulnerability as “low” for all indicators. Ndoro says the pandemic may have contributed to the change, but he doesn’t think it is entirely to blame as the trend started before COVID-19 arrived.
“Some of the vulnerabilities were already noticeable before the pandemic hit. We also assess intensity and persistence. So it takes some time to report vulnerabilities, that is, when they have exceeded a certain threshold, ”he said.
CMHC needs to see activity above a certain threshold for two quarters a year before upgrading the risk, and Ndoro says that has been on the rise for “three or four quarters” of last year.
Interprovincial migration during the pandemic played some role, with more people arriving from Ontario and British Columbia than last year.
“I think what’s happening is that the pandemic has had uneven impacts on the population. It therefore affects different segments of the population disproportionately, ”Ndoro said.
“These people in the middle to upper income brackets, so to speak, haven’t necessarily been so affected by COVID. And since mortgage rates are so low, these people can take advantage and increase demand. why we see part of what we see. ”
Ndoro said if he continues to see overvaluation above CMHC’s acceptable threshold in the next quarter of the year, he believes there is a possibility of raising Halifax to a “high” vulnerability level. .
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