Vancouver ranks 7th globally for city most at risk of real estate bubble

Oct 1 2019, 8:56 am

Vancouver is one of the top global cities at risk of a real estate bubble.

According to theĀ UBS Global Real Estate Bubble Index, which puts the housing market into a long-term perspective and is designed to track the risk of property price bubbles in global cities, Vancouver is seventh on the index for 2019.

We’re not the only Canadian city to make the list — Toronto is ranked second.

In 2018, Hong Kong topped the list, but this year, the index suggests the greatest risk of a bubble is currently in Munich.

The seven bubble risk cities in order are Munich, followed by Toronto, Hong Kong and Amsterdam. Frankfurt and Paris are new additions to the bubble risk zone, according to the Index, Vancouver is seventh.

But, the Index also states that valuations in Vancouver, San Francisco, Stockholm, and Sydney have “fallen sharply.”

In Vancouver, year over year price growth rates have reversed from over 10% to -7%.

“Sky high valuations and overstretched affordability have made the market vulnerable to even minor demand shifts,” the report concludes.

UBS.com

One of the reasons the study attributes to the sharp increase in home prices in Vancouver, and to most of the bubble cities, is “the technology-driven economic boom in many major centres led to an explosion in residential demand.”

Vancouver UBC real estate report

“Price bubbles are a regularly recurring phenomenon in property markets,” read the report. “The term ‘bubble’ refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proven unless it bursts. The UBS Global Real Estate Bubble Index gauges the risk of a property bubble on the basis of such patterns.”