Toronto is Number 1 city in the world, when this comes to risk of housing bubble bursting.
According to Annual Global Real Estate bubble index of Swiss Bank UBS, which ranked Vancouver as a city with 4th highest risk of bubble in housing.
Ranking looks at major 20 cities worldwide, which assesses risk of of a bubble of every city, this is that which UBS defines as “a sustained and substantial mispricing of an asset, existence of this cannot be proved as unless it get burst.”
Bank noted that inflation-adjusted house prices of Toronto have got doubled in 13 years, incomes have risen by 10%. Prices had been rising in double digits, often a sign of a bubbled-up market.
As in much of the developed world, very low interest rates have allowed Toronto’s mortgage borrowers to increase the amount of housing they can afford to take on, UBS said in its report. “A strengthening Canadian dollar and further interest rate hikes would end the party,” UBS wrote.
The bubble may have already burst
Some say that party is already ending. Bank of Canada raised rates of interest twice since this past summer, and expected to again have a hike later early next year or during this year. Canadian dollar firmed up by 80 cents of U.S dollar.
Other observers also suggested that housing bubble in Toronto has come and gone. Peaking after this spring, Toronto’s home prices have come down along with detached home prices which were down by 24.5% since peak in April, also condo prices came down more than 6% during that time.
As per economists at Bank of Montreal during this spring peak was at huge bubble, and this bubble has burst.
In Vancouver, UBS’s list during last year, price growth of homes peaked in year 2016, it was growing by double digits. Despite of slower growth of today’s home, “real estate market remain in bubble-risk zone, harbouring elevated correction risk and substantial downside,” UBS said.
As per reports all cities virtually have been surveyed and there comes risk of a bubble in housing and increase over past year.
UBS said that three-quarters of surveyed cities are at huge risk of housing bubble. In order, cities with highest risk of housing bubble are: Amsterdam, Hong Kong, London, Sydney, Vancouver, Munich, Stockholm and Toronto.