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The Canada Mortgage and Housing Corporation (CMHC) complex in Ottawa on Thursday Oct. 9, 2008.The Globe and Mail

Canada's housing agency is warning that prices are soaring in smaller communities in British Columbia and Ontario as the real estate boom in Vancouver and Toronto spreads deeper into the suburbs.

On Wednesday, Canada Mortgage and Housing Corp. confirmed its "red warning" for the country's real estate market as a whole amid worries about rapidly rising prices in and around Vancouver and Toronto.

"We're seeing the spreading of price pressures," CMHC chief economist Bob Dugan said in an interview. "Our concern here is that the price acceleration is becoming more broad-based. It's concentrated in communities that are close to Vancouver and Toronto."

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Abbotsford (70 kilometres east of Vancouver) and Barrie (90 kilometres north of Toronto) are among the communities where home prices have surged over the past year. It takes about 90 minutes to drive from there to downtown Vancouver or Toronto in normal daytime traffic.

The price for detached houses sold in Abbotsford averaged $643,383 last month, up 28 per cent from a year earlier. Barrie is seeing an upswing too, with the average price for detached properties jumping 24 per cent to $476,668 over the past year.

Many suburbs closer to Vancouver and Toronto have already been part of the spike in prices regionally, prompting some buyers to search farther afield for homes within their budgets.

Skyrocketing real estate prices in both markets have led to increasing unease in Ottawa. The Bank of Canada recently warned that growth is unsustainable, while the federal government has established a working group to recommend ways to make housing more affordable there.

Analysts expect British Columbia and Ontario to account for about two-thirds of this year's Canadian sales of existing residential properties.

"We're seeing evidence of very strong price growth around Vancouver and Toronto," Mr. Dugan said after CMHC released two new reports on Canada's housing sector.

Evan Siddall, the federal Crown corporation's chief executive officer, told The Globe and Mail last week that CMHC would issue a red alert – confirmed on Wednesday in the agency's housing market assessment.

Under CMHC's overall risk ratings of 15 metropolitan markets, Hamilton moved from moderate risk of problems (yellow warning) to strong (red warning). The problems include not just fast-rising prices, but overvaluation.

CMHC maintained its overall red warnings for Vancouver, Toronto, Calgary, Saskatoon and Regina, meaning that, with the addition of Hamilton, six metropolitan markets now display "strong evidence of problematic conditions."

Four regions are continuing to show moderate signs of problems (Edmonton, Winnipeg, Montreal and Quebec City) while five others are deemed low-risk (Victoria, Ottawa, Halifax, Moncton and St. John's).

"For Canada as a whole, the growth in house prices remains elevated. After adjusting for inflation, house prices climbed 11 per cent in the second quarter of 2016 from a year ago," CMHC said in its report. "In combination with the existing evidence of overvaluation, the overall assessment for Canada is thus raised from moderate to strong evidence of problematic conditions."

Ontario cities experiencing sharp price gains include Hamilton and Oshawa. In British Columbia, prices have also climbed in communities outside the Lower Mainland, including the Okanagan city of Kelowna.

CMHC, which insured $523-billion worth of mortgage debt as of June 30, provides policy advice to the federal finance minister. Earlier this month, the federal government tightened mortgage lending rules. Ottawa also closed tax loopholes used by some foreign buyers.

The price for detached houses sold last month in Greater Vancouver averaged $1.53-million, compared with $1.01-million in the Greater Toronto Area.

Amid low interest rates and robust demand, average prices hit record levels in the GTA recently.

But average prices have fallen in Greater Vancouver from highs posted earlier this year. B.C. housing sales began slowing in the spring, before the provincial government implemented a 15-per-cent tax on foreign buyers in the Vancouver region in August, CMHC market analyst Robyn Adamache said.

Despite parts of the B.C. market cooling off in recent months, the average price for detached houses sold in the Vancouver area is still 9 per cent higher than a year earlier. "And condo prices have been going up for the past year, after almost five years of flat prices for condos here," said Ms. Adamache, who is based in Vancouver.

In a separate outlook report, CMHC said it expects housing starts in Canada could slip 5 per cent next year and stabilize in 2018, while sales of existing homes could decrease 5 per cent next year and hold at about same level in 2018.

The agency predicts average prices for various types of existing housing may increase nationally by a modest 2 per cent next year. The average price for all types of residential properties sold in Canada on the Multiple Listing Service is forecast to be from $473,400 to $495,000 this year.

"Average MLS home prices will continue increasing, but at a slower pace for Ontario and British Columbia in 2017 and 2018, than in 2016," CMHC said. "Other provinces should experience a relatively stable and positive growth over the forecast horizon."

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