Canada

Toronto Tops UBS Global Real Estate Bubble Index, Vancouver Comes In Fourth

Toronto Tops UBS Global Real Estate Bubble Index, Vancouver Comes In Fourth

Swiss-based mega bank UBS, updated its Global Real Estate Bubble Index. The index, looks for cities that experience price climbs that disconnect from fundamentals. Topping the list this year is Toronto, and in fourth place is Vancouver. Let’s take a look at the bubble factors they’re observing.

Global Prices Are Elevated

UBS analysts note prices are elevated beyond logic in many global cities, with Canada nabbing two of the top spots. The firm attributes a combination of low interest rates and foreign capital, meeting up with a local “fear of missing out.” Yes, one of the world’s largest banks basically just said local FOMO is being taken advantage of by foreign capital flows. Probably not a new concept if you’re a regular reader, but it’s nice to see we’re all on the same page here.

UBS Global Real Estate Bubble Index Chart
UBS Global Real Estate Bubble Index Chart.

Toronto

Topping the list this year is Toronto, which the bank believes is the most at risk market in the world. Analysts noted price growth reached an “excessive 20% year on year in the last quarter.” Inflation adjusted, prices have doubled in the past 13 years. Rents have only increased by 5%, and incomes less than 10%. The firm believes either a stronger Canadian dollar, or another interest rate hike, would send the market spiraling lower.

Vancouver

Vancouver is the only other Canadian city to make the list, and is fourth highest risk of being in a bubble. Analysts from the firm note that prices are up 25% year on year, when inflation adjusted. Incomes and rental prices are only up 3% and 5% respectively. Analysts don’t believe it’s as inflated as Toronto, but does note the market has “substantial downside and elevated correction risk.”

Bubbles aren’t necessarily scary, and sometimes they can just be a lull in the market while incomes catch up. Although some people argue that’s impossible. The report does warn that investors in these “wildly overvalued markets should at least not expect real price appreciation in the medium to long run.” Basically, they’re calling a top on price growth. How Toronto and Vancouver real estate responds to this is up to the local markets.

Like this post? Like us on Facebook for the next one in our feed.

Photo via Martin Abegglen.

Discuss On Facebook

6 Comments

  • Reply
    Eric 3 weeks ago

    I don’t trust any report if it skips all cities in China in the bubble rank. It is meaningless

    • Reply
      Ewan Z. 3 weeks ago

      Shanghai prices are up 2.8% from last year, and Beijing is up 5.2%. Those are actually low rates of price growth for an emerging market.

      http://fortune.com/2017/09/18/china-economy-home-prices-housing-property/

      I do find it humorous that Canadians keep pointing to China’s problems, not realizing that the environment is very different. Personal debt is in China is high, yes. However, it’s only a fraction of the massive GDP. Canada’s GDP is now dwarfed by personal debt. China’s economy is acting like a developed country, and Canada is acting like an emerging market.

  • Reply
    Ahmed 3 weeks ago

    Never fails to amaze me that people will believe that land is scarce in one of the least densely populated countries in the world.

    • Reply
      bluetheimpala 3 weeks ago

      The concentration of resources/capital/investment/development/people/agriculture/industry in a small section of southern Ontario is unparalleled. No where in the world has such a strange mix which, for better or worse, will never change. The only industries that are able to remove themselves from this ‘supply chain’ are ones that require cheap space (i.e. unique manufacturing) or access to resources (i.e. mining, aggregates, agriculture) and even then, if you go too far from the hub your costs go in more than just monetary metrics.
      By your logic, provinces like Manitoba and Saskatchewan should be bursting at the seams with industry, and the people they employ, buying up swathes of cheap land. This is clearly not the case.

      FULL DISCLOSURE: I am not an agent and have owned in Toronto for 5 years. Looking to go to a more rural location so I’m not a TO nut hugger.

  • Reply
    Sebastien 3 weeks ago

    But but but… Immigration!

  • Reply
    Global Real Estate Bubble Index: Toronto Most Overvalued, San Francisco a Distant 10th - munKNEE dot.com 3 weeks ago

    […] original article, written by Daniel Wong, is presented here by munKNEE.com – “ The internet’s […]

Leave a Reply

Your email address will not be published. Required fields are marked *