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Canada housing agency reports overvaluation in several markets

Staff Writer |
Canada's housing market still shows strong evidence of problematic conditions, the federal housing agency said, though it reported signs of improvement in some markets.

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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 historical averages.

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 report said.

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.

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