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…According to the latest UBS annual Global Real Estate Bubble Index released today, Toronto home prices now rank as the second biggest bubble in the world and, while Vancouver was a few spots lower, it still beat out notorious markets like San Francisco and Singapore.
This post by Lorimer Wilson, Managing Editor of munKNEE.com is an edited ([ ]) and abridged (…) version of an article by Daniel Wong for the sake of clarity and length to ensure a fast and easy read.
Toronto Home Prices
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 but UBS believes that growth might be coming to an end soon as The Bank of Canada is expected to taper in 2022, well ahead of the Federal Reserve, which would likely raise mortgage rates and discourage foreign real estate investments and this, in turn, could lead to an abrupt end to the current housing frenzy…
Global real estate prices are often used to dismiss Canadian home price growth…but few bubbles have inflated this fast, with policymakers enthusiastically cheering them on.
Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
Related Articles from the munKNEE Vault:
1. Canadian Residential Real Estate Prices Growing the Fastest In the G7
Saying Canadian home prices are frothy, is like saying Mozart had a little musical talent. Residential real estate prices in Canada are growing at the fastest rates in the G7 and not just over the past year, but over the past 3 decades, Nothing in the G7 comes even close to this rate of price growth.
2. IMF Warns Of Significant Downside In Home Prices Worldwide
…The International Monetary Fund (IMF) warned this week in its regular Financial Stability Report that global home prices are now stretched. Stimulus policies backstopped the market, creating moral hazards. Buyers now have a “can’t lose” feeling, pushing them to pay risky premiums for property. As a result, the agency now sees a significant downside in a worst-case scenario. Their model …
3. U.S. House Prices Have Spiked 19.7% On Average Y-o-Y; +32.4% In One Metro Area
According to the National Case-Shiller Home Price Index, house prices have spiked 19.7% on average in the U.S. from a year ago, the biggest year-over-year increase in the data going back to 1987. The national index of this raging mania doesn’t do justice, however, to certain individual metropolitan areas where price spikes reached up to 32%. Here are the details of those metropolitan areas.
The whole world might be in a property bubble, but Canada is the second riskiest (only beaten by the Netherlands) according to Oxford Economics which believes a correction is likely to take place and the longer it’s put off, the worse it will be.
“Home ownership” is regarded as some sort of Holy Grail of financial planning based upon the conventional belief that owning real estate is the #1 path to (at least) financial security, if not affluence, but there is no substance to this belief. Here’s why.
Bloomberg Economics says the run-up in global real estate prices over the last year has produced a warning signal unlike any other, not seen since right before the 2008 financial crisis.
7. There’s NO Comparison Between the U.S. Housing Bubble of 2006 and Canada’s Today
The house price-to-rent ratio shows Canadian real estate is drastically overvalued making the U.S. real estate bubble back in 2006 look like a sleepy backwater market of value investors.
8. Revealing Insights Into Current American & Canadian House Pricing Trends
High flying home prices may be getting close to pushing their limits as last month home sales also saw a sharp decline in volume, partially attributed to prices.
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- Related article: “Planning To Purchase A Home? Here’s Some Financial Advice“
