UBS: Toronto’s Bubble Risk Increases, While Vancouver Is Now Just “Overvalued”

One of the world’s largest banks is seeing real estate bubbles across the world. UBS analysts published their 2020 Bubble Index, noting this many markets haven’t increased at once since 2006. In Canada, Toronto lost it’s spot as the world’s second biggest bubble to Frankfurt. Despite slipping in rank, the bank is noting fundamentals continue to get worse. Meanwhile, Vancouver real estate is no longer in bubble territory after a price drop, and is now just “overvalued.”

Global Real Estate Markets All Look The Same

UBS is seeing real estate prices rise across the world, regardless of fundamentals. The last time fewer cities with negative price growth appeared was 2006. Analysts at the big Swiss bank called the trend “unsustainable,’ considering rents. In almost every market, rental prices are on the decline. The lower they drop, the less ownership typically makes sense.

Toronto Real Estate Is The 3rd Biggest Bubble In The World

Toronto real estate’s bubble indicator continued to get worse, but the market still fell to third. Although, the third biggest real estate bubble in the world is still an accomplishment. The bank believes prices increased entirely due to “improved financing conditions.” This made already stretched affordability even worse. The firm also believes a stronger loonie will deter investment from foreign buyers.

Vancouver Real Estate Is “Overvalued”

Vancouver real estate has fallen out of bubble territory, and is now just “overvalued,” according to the bank. Analysts note prices declined 10% between 2018 and 2019, but prices are still “sky high.” Combine this with a weak rental market, and they see limited upside for price growth. 

Despite the current global recession, real estate prices across the world are rising. This is regardless of fundamentals, and the bank believes this is the result of credit driven growth. The bank also added government incentives are temporarily propping up prices, and fundamentals. They believe as these programs wind down, prices are likely to follow. This is also supported by falling rental prices in most markets, which usually precede falling prices.

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  • Kyle 1 year ago

    Synchronistic movements every where are generally bad. I’m more concerned about zombie companies, but the inefficiencies extended by government to prop up markets will likely to lead to doubling down on populism (left or right).

    Bad decisions are usually made when governments need to focus on immediate issues, instead of planning for the future.

    • Bkl 1 year ago

      This housing bubble in Toronto and Vancouver continued to build up for years now. The government wants to make homes unaffordable and steal out future. This is government planned, this crisis is just another excuse to push prices higher.

      • Li 1 year ago

        Don’t worry. They’ll “fix” it by giving their donors more money to do exactly what they’ve been doing.

      • Paul 1 year ago

        The government is not the primary reason for the bubbles. Money being moved around is. People chasing after bad with good is also the reason. The only thing the government can be blamed for is not doing enough to curb it.

        • backwardsevolution 1 year ago

          Where have you been, Paul? The government, through the Bank of Canada, has artificially held down interest rates. They have massively increased immigration, especially favoring high wealth individuals. They turned a blind eye on money laundering. Yeah, yeah, I know they’re “looking at it”. That’s what they always say.

          They increased amortizations out to 40 years at one point, allowed no down payments and no documentation. The amount of money that was made on flipping assignments is unconscionable.

          First-time homeowner schemes, bailing out the banks in 2008 (at the same proportion as the U.S. banks were bailed out).

          The government IS the primary reason for the bubble. They should all be swinging from lampposts.

  • Doomcouver 1 year ago

    Time to move to Chicago….

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