Ontario Real Estate Is The Most Overvalued In Canada, Slow Growth Expected: Moody’s

Exuberant Canadian real estate buyers sent home prices soaring during the pandemic. Now some provinces have severely overvalued housing markets, according to Moody’s. The credit rating giant’s provincial models show severe overvaluations in provinces like Ontario. Analysts from the firm forecast this will result in slow price growth over the next few years. Not all markets are overvalued though. Markets like Alberta and BC (!) are actually considered undervalued, with the former expected to see a boom. 

Canadian Cities Are Over 22% Overvalued

Canadian home prices are generally overpriced across the country, especially in cities. The agency’s models show the urban composite is 22.6% overvalued as of Q2 2021. They still expect them to rise another 2.6% next year, with growth tempering even lower the year after. The average growth over the next two years is forecast to be an annual average of 1.38% over the next two years. 

Canadian Residential Real Estate Valuation By Province

The percent deviation from estimated valuation for Canadian housing markets by province. Positive numbers mean overvalued and negative numbers mean undervalued.

Source: Moody’s Analytics; RPS Brookfield; Better Dwelling.

Ontario Is The Most Overvalued Real Estate Market In Canada

Ontario real estate is the most overpriced in the country, surprising no one in the province. They estimate the province’s real estate market is 22.6% overvalued in Q2 2021. They see prices rising 1.3% next year and showing an average annual growth of  0.3% over the next two years. Elevated inflation can make this a significant correction over that period. 

BC Real Estate Is Undervalued, Just Not In Vancouver

BC real estate is pricey but Moody’s thinks it might actually be undervalued. The province’s markets were 3.0% undervalued in Q2 2021. They only see 2.0% growth next year and an average of 1.8% annual growth over the next two years.

Careful not to conflate “BC is undervalued” with “Vancouver is undervalued.” The agency estimates the latter is 23.0% overvalued as of the same quarter. This is a significant gap between the price of a typical home in the province.

Canadian Residential Real Estate Forecast By Province

The forecast change in price next year for Canadian housing markets by province and the forecast avg. annual growth for the next two years.

Source: Moody’s Analytics; RPS Brookfield; Better Dwelling.

Nova Scotia and Quebec Real Estate Are Significantly Overvalued

After Ontario, the two most overvalued markets are Nova Scotia (15.3%) and Quebec (14.3%). Nova Scotia is forecast to rise 0.9% next year and drop an annual average of 3.0% over the next two years. 

Quebec is expected to see prices rise 2.4% next year, with average annual growth reaching 3.0% over the next two years. Being overvalued doesn’t necessarily mean prices will fall, as Quebec demonstrates. 

Alberta Real Estate Is The Most Undervalued and Forecast To Lead In Growth

Not every real estate market in the country is overvalued. In fact, Alberta real estate is the most undervalued market in Canada. The province’s residential market is estimated to be 19.8% undervalued in Q2 2021. That isn’t forecast to last for long though.

Alberta home prices are forecast to lead the country in price growth over the next couple of years. The agency expects home prices to rise 7.8% next year. Over the next two years, they’re forecasting an average annual growth rate of 9.3%. The province has been underperforming for quite some time. However, more forecasts and data points appear to see it leading growth. 

Generally speaking, the firm doesn’t expect a sharp crash in a normal scenario. Not in their base-case forecast anyway, which is what would happen without any hiccups. They see overvalued housing markets seeing slow growth or mild declines.

Though no asset market ever sees prices crash when people think it’s possible. When people are aware of the risk, they can move to mitigate it and lower exposure. It’s only when people see no risk that they become overexposed and amplify shocks.



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  • V 3 years ago

    Nice write up but properties are at least 30% overvalued in places like Whitby/Oshawa.

  • JC 3 years ago

    My First post in BD, I lived in GTA Ontario for the past 25 years and I confirm that this is true, and worse than you imagine.

    With inflation so high, and historic low rates, added with “historic immigration numbers” and high Non-Condo demand for End-users, investors, new immigrants, young families, and people who are selling smaller to buy bigger, Detach house prices are rocketing to the moon. My friend’s generic 2-garage detach in school zone is gaining a value of $5k to $10k PER DAY within the last 30 days.

    There is no solutions currently to sky-high inflation, and middle & working class are sufferings. We work simply to get food money, for 99% of the GTA residents your personal net worth is now almost relevant to your income since the pandemic.

    Everyone is maximizing their leverage since the debt will be inflate away in time, there seems to be no risk in carrying debt anymore. And real estate in GTA is indeed outpacing inflation currently. If there is a greed index for GTA real estate I am sure it is now at 100/100.

    I am planning to move bigger as well with maximum leverage, but couldn’t convince myself to do so this at this moment, the current sold prices are beyond my comprehension. I am actually fearful on the high prices and I am bearish on GTA real estate for 2022 or 2023. But those of you here for many years, can see that all bears have been rekted and left behind all these years.

    GTA is still a decent place to live and work, however the coming generation will not be able to enter the market/buy their first home and start their average-size family.

    I just hope for a stable and healthy housing market and economy so we can work and live peacefully and not in fear or extreme greed.

  • WB 3 years ago

    Totally agree with JC’s post.

    After watching the housing market in Ontario closely for over a decade I have given up all hope of a correction.

    I thought the 2008 meltdown would contain housing prices – I was wrong!
    I thought the COVID pandemic would contain housing prices – wrong again!
    I will be watching the impacts of inflation closely ….

    Nothing seems to be able to kill this vampire housing market!

    Artificially low interest rates, greedy banks, and flip-flopping government regulation have gotten us in this mess.

    This so out of control that we are now having to raise billions in tax dollars and development costs (from folks who can’t afford to buy in this overvalued market) to build thousands of affordable housing units for folks who can barely afford shelter at current market rates!

    This is a social-economic five alarm fire and our politicians are only concerned with preserving current values even it it cripples us economically and increases the wealth divide between haves and have nots … tragic

  • Heather 3 years ago

    I mentioned the Alberta section to my son who lives in Edmonton. He figures there will be a lot of people in default on their mortgages soon. So, maybe Calgary will pick up but not necessarily all of Alberta.

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