Toronto is now the world’s second most overvalued property market: UB
Toronto has emerged as the world’s second most overvalued housing market on the back of low rates and supply shortages, according to UBS AG’s annual global real estate bubble index.
Vancouver was sixth in the Swiss bank’s 2019 index that is led by Munich, with Hong Kong, Amsterdam and Frankfurt filling out the other top spots.
Toronto’s housing prices tripled between 2000 and 2017 and even the introduction of a foreign buyer’s tax and tighter mortgage rules only temporarily cooled red-hot prices, according to UBS.
“A major price correction seems unlikely in the short term given improving mortgage conditions, a weakening Canadian dollar and falling supply,” the bank said.
In Vancouver, the 2016 regulatory changes helped depress prices by 7 per cent compared with a year ago, but “sky-high valuations and overstretched affordability make the market vulnerable to even minor demand shifts,” UBS said.
“Due to increasing regional housing supply, a turnaround is unlikely for now, especially as real prices are still 75 per cent higher than a decade ago,” according to the report’s analysis of Vancouver. “However, downside risks are mitigated by still attractive financing conditions, as the Bank of Canada has lowered the qualifying mortgage rate for the first time since 2016.”