04/30/2015 11:49 EDT | Updated 04/30/2015 11:59 EDT

Canada's Riskiest Housing Markets Aren't In Toronto Or Vancouver

Canada’s riskiest housing markets are not in the booming metropolises of Vancouver and Toronto, but smaller Prairie cities Winnipeg and Regina, according to the latest assessment by the federal housing agency.

The Canada Mortgage and Housing Corp.’s latest house price analysis and assessment released Thursday concludes that there is a high risk of problematic housing conditions — defined as overheating, acceleration in the growth of house prices, overvaluation and overbuilding — in Regina and Winnipeg.

The CMHC found evidence of overvaluation and overbuilding in Winnipeg. In Regina, it found strong price acceleration, overvaluation and overbuilding, particularly in the condo market.

Risks in Toronto, Montreal and Quebec are also higher than the national level, but remain moderate. The CMHC found overvaluation in those urban centres as well as overbuilding in Toronto and Montreal.

"Condominium units under construction are near historical peaks in these two [cities]," the report read. "Inventory management is necessary to make sure that the currently elevated number of condominium units under construction does not remain unsold upon completion."

And while there have been recent reports of a slowdown in buying activity in Calgary on the back of falling oil prices, that city and its Alberta neighbour Edmonton have a low overall risk, the report found.

Lower oil prices, it said, are expected to “to place downward pressure on house price growth, which could lessen the current risk of overvaluation in Calgary.”

In Toronto and Vancouver average housing prices are creeping ever closer to $1 million. The Economist magazine recently named Canada the most overvalued housing market in the world and even the Bank of Canada has suggested national average home prices could be inflated by as much as 30 per cent.

But the CMHC report notes that high prices do not necessarily mean homes are overpriced.

“It is possible to have no overvaluation in a high priced centre, while overvaluation may exist in a lower priced centre.”

“For example, average prices in Vancouver exceed the national average, although no overvaluation is detected. In comparison, average prices in Québec are below the national average and overvaluation is detected.”

Vancouver poses a low risk of problems, which may surprise some observers who have noted sky-high home prices are taking a toll on affordability. The report also found low risk in the other metropolitan centres it analyzed: Saskatoon, Halifax, Ottawa and St. John’s.

Overall, the national housing market is low risk, the report concluded, with home prices slightly higher than levels consistent with income.

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