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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. San Francisco is in 10th. Let’s take a look at the bubble factors they’re observing.
The original article, written by Daniel Wong, is presented here by munKNEE.com – “ The internet’s most unique site for financial articles! (Here’s why)” – in an edited ([ ]) and revised (…) format to provide a fast & easy read. Visit our Facebook page for all the latest – and best – financial articles!
UBS analysts note prices are elevated beyond logic in many global cities, with Canada nabbing two of the top 10 spots. The firm attributes a combination of low interest rates and foreign capital, meeting up with a local “fear of missing out.”
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.
…The report warns 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.
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