UBS report rings alarm bells over Toronto, Vancouver housing bubbles, but predicts prices and sales will rise again. Keep reading.
UBS Switzerland AG’s annual Real Estate Bubble Index, which tracks housing markets across 25 cities, said Toronto’s housing market is facing the highest bubble risk, while Vancouver is also considered to be bubbling.Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc.
Another metric used is the number of years an apartment must be rented out to pay off the mortgage. Again, Toronto is around the middle of the pack, with 26 years of rental income needed to own an apartment. But it would take much longer to own a flat in several other cities that did not make the bubble risk list.
The report sometimes suggests a lack of supply, or scarcity of housing, is responsible for rent and price inflation. But it also concludes the opposite is true in other places. The report mentions rents “have only risen hand in hand with local wages,” suggesting scarce housing is not the reason for rapid rent increases.Article content
The report further suggests the housing boom in Canada became “more of a countrywide phenomenon and is therefore hardly driven by a shortage of construction.” But this statement ignores that the population-adjusted rate of housing construction in Canada is nearly half what it was in the early 1970s.
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