A Global Swiss Bank Named Toronto The 2nd Biggest Real Estate Bubble In The World

Hong Kong, New York City, and Paris? They have nothing on Canada’s biggest real estate bubbles. UBS released its annual Global Real Estate Bubble Index today. Two Canadian cities managed to rank near the top of the charts — Toronto and Vancouver. Toronto home prices now rank as the second biggest bubble in the world. As for Vancouver, it was a few spots lower, beating notorious markets like San Francisco and Singapore. 

Toronto Real Estate Is Now The 2nd Biggest Bubble In The World

Toronto real estate is now the second biggest bubble in the world, moving up a spot from last year. While it’s not the top spot it held in 2017, it has a much higher bubble risk score. Pretty impressive for a city that didn’t even rank in the 2016 index. That’s how fast prices have grown.

UBS said Toronto real home prices doubled over the past ten years, in part to population growth. In 2018, they observed a housing correction that was restoring some fundamentals. It carried through to 2019, but came to an abrupt stop by year-end. At that point, falling mortgage rates reignited high home price growth. It was helped by the Bank of Canada’s mortgage liquidity injections. Since the pandemic hit, this trend has accelerated even faster. 

The big Swiss bank believes that growth might be coming to an end soon. “The Bank of Canada is expected to taper in 2022, well ahead of the Federal Reserve, a move that would likely raise mortgage rates and discourage foreign real estate investments,” said the bank. Adding,  “this, in turn, could lead to an abrupt end to the current housing frenzy.”  

Vancouver Real Estate Is Now The 6th Biggest Bubble In The World

Vancouver real estate is also climbing the charts, taking the sixth spot — up from the eighth a year ago. UBS observed a similar trend to what they found in Toronto. There was a price correction from 2018 to 2019. It was abruptly halted by the end of 2019, when mortgage rates fell and it reversed course.

UBS sees Vancouver cooling by the same mechanisms that apply nationwide. “Tightening down payment and income requirements for mortgages should moderate current market dynamics.” 

Global real estate prices are often used to dismiss Canadian home price growth. It’s true, global home prices are climbing due to a low rate environment. What’s happening in Canada is different though, just based on the sheer size of the climb. Few bubbles have inflated this fast, with policymakers enthusiastically cheering them on.

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  • D 3 years ago

    What does Hong Kong, Paris, San Fran and New York have over Toronto? Oh right everything that counts.

  • michael 3 years ago

    Even more surprising than there’s a worse bubble than Toronto was that it’s Frunkfurt.

    • bluetheimpala 3 years ago

      ok. But what if it isn’t a bubble in the “bursting” sense but an asymmetry that sees slight up and down movement that nets flat gains and gets worked out with anemic asset appreciation for the next 20 years. We all look at these lists like the top 10 are banana republics and poor ol’ Canada was sucked into it. Where is ireland or iceland or romania or austria or new zealand? All of the top 10 are places people currently and will want to live.

      • SH 3 years ago

        Can you cite a single asset bubble that resolved itself the way you’ve described?

        Ireland was certainly in the top RE bubbles for many years before it collapsed. New Zealand currently has a government that actually cares about its citizens and is bringing in real measures (not like the Liberals’ demand-boosting measures intended to enrich the CCP money launderers at the expense of middle class Canadians) to finally tamp down the bubble. You think Canada is a nicer place to live than Austria? You need to travel a bit.

  • Don Jason 3 years ago

    Toronto bubble is an unburstable bubble. It is artificially created by the government’s zoning laws, namely the Greenbelt.

    • RM 3 years ago

      “Unburstable” … gotta love the hubris.

    • Smaug 3 years ago

      Cities would be so much more livable if not for all those stupid trees.

      • M.Bury 3 years ago

        “The trees shall all be kept equal, by hatchet, axe and pre-approved mortgage.”

    • WS 3 years ago

      No it’s not the greenbelt, the land scarcity myth is realtor marketing.
      How can you have record breaking building for years, and still claim shortage of land?
      The true causes:
      FOMO, money laundering, criminals and politicians, accommodated by negative interest rates.
      Perfect breeding ground for a bubble that will eventually burst.
      Timing the bursting is impossible, as there are too many moving parts, but there is no hope of an orderly correction.
      It will be messy, no amount of lowering rates further can save this bubble from bursting.

      • E Jayell 3 years ago

        Thankfully science and stats reign supreme and at less than 5% foreign boogeyman investors not to blame FOMO and locals with multiple mortgages and flippers make up highest percentage of transactions as per StatsCanada CMHC and housing registry’s
        Fed solutions with provincial oversight and municipal control and economist all pointing to supply issues and policies for social housing not incentives to middle class or first time buyers

    • Alex 3 years ago

      It’s a multitude of factors, greenbelt simply plays a part.

      There is however, no such thing as an unburstable bubble.

      • E Jayell 3 years ago

        Thankfully science and stats reign supreme and at less than 5% foreign boogeyman investors not to blame FOMO and locals with multiple mortgages and flippers make up highest percentage of transactions as per StatsCanada CMHC and housing registry’s
        Fed solutions with provincial oversight and municipal control and economist all pointing to supply issues and policies for social housing not incentives to middle class or first time buyers

        • Felix 3 years ago

          A major developer said openly bragged about selling 50% of their inventory overseas, to limit supply and sell it back to locals before the transfer. Of course, this would never register as a foreign buyer, since that data is only collected at the time of property registration, and at no point does Canada collect beneficial ownership information, so it has no idea who’s buying, just the location of the nominee director.

          But yeah, foreign buyers don’t exist. The carefully collected data that isn’t collected proves this is a myth.

    • waldo 3 years ago

      you are right about the government backed bubble part. Not correct about the Greenbelt part. Emperor Justinian will not let the housing market go down. He will do everything in his power to keep it extremely inflated. If need be he will bring in another million people to increase demand for a commodity that is artificially kept scarce and its a risk free guarantee provided by the govt.

    • off shore 3 years ago

      It means one thing, no matter what do not keep Canadian dollars.
      Keep your savings off shore.

      • Vic A. 3 years ago

        I don’t have a SINGLE PENNY (beyond what I need for my routine expenses) in Canadian dollars, and my assets are not kept in Canada, either. Luckily I’m originally from the US, and have all my money invested in US DOLLARS in US index funds (Vanguard).

    • Nassim 3 years ago

      Wow, the Greenbelt sent the price of housing across the country higher.

      Toronto had one of the lowest rates of price growth over the past year, so it’s crazy how it sent homes across the country higher. Does this magical belt have matching shoes too?

    • Don Jason 3 years ago

      Lack of supply will never let the prices come down. Supply is squeezed because of lack of serviceable land.

    • Vic A 3 years ago

      I would have “almost” said you’re right because of all the artificial “propping up” by the corrupt, criminal politicians who run the country (greenbelt, devious zoning laws by current homeowners, and the list goes on……).

      But that reality will not materialize for ONE fundamental reason: Toronto (and Canada in general) does not have anything of substance to offer the world! It is not like a San Francisco (innovation capital of the world), or a New York, LA or Miami!

  • Average Man 3 years ago

    Damn. What is going on in Frankfurt!?

    • Ich 3 years ago

      Merkel accepted all the immigrants around the world.

  • Steve 3 years ago

    They have been warning about a Toronto bubble for 20 years.

    • UBS Guy 3 years ago

      Tell me you didn’t real the article, without telling me you didn’t.

      Toronto didn’t make the list until 2017. Vancouver has always been a place for global investment. No one knows or cares where Toronto is, other than you can give a salesperson a $50,000 in Hong Kong to secure a $1,000,000 unit, and they’ll sell it and come back to you with an extra $70-140k in two years, less $10k for commission.

  • Pat 3 years ago

    Commence au Festivale!

  • Flipg 3 years ago

    The Grim Reaper always comes for the Harvest. But waits until the wheat is ripe. Canada is overdue for the Harvest.

  • Brian 3 years ago

    This is great. Toronto still have more potential!!

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