Vancouver housing prices unmatched on the planet, says Swiss bank

The rise in Vancouver’s average housing
prices compared with the growth in average
wages, rents and other economic factors
make it the most likely to experience a
sudden downward correction compared
with 17 other large cities around the globe,
according to the UBS Global Real Estate
Bubble Index released this week.  When it comes to overpriced real estate,
Vancouver’s “bubble risk” is unmatched on
the planet, according to a report by Swiss
bank UBS.  The report also warned that investors are less
likely to see growth in property value in
high “bubble risk” cities.
Jon Woloshin, strategist at UBS Wealth
Management Americas, said the report
doesn’t mean Vancouver is likely to
experience a home price correction like
the U.S. housing crisis that contributed to
the 2008-09 recession. Rather, it’s meant as
a cautionary signal for potential real estate
investors. “Based on the different criteria
that were factored into all these major
markets, as we sit here today, Vancouver on
a risk-reward basis scored the lowest, which
is why it’s at the top,” he explained. He
added that the province’s move to control
the city’s overheated housing market by
imposing a 15 per cent tax on foreign buyers
of homes in Metro Vancouver as of Aug.
2 could reduce its bubble risk rating. The
UBS report was based on Vancouver data
up to last spring, before the foreign buyers’
tax was implemented. “If the government
cracks down and really goes after it, yeah,
I think it will have an impact,” Woloshin
said in a telephone interview from New
York. “If a lot of smart lawyers get involved,
maybe it becomes less of an issue.”
Last week, the British Columbia
government credited its new tax in
reporting that housing deals in Vancouver
involving foreign buyers dropped to 60
between Aug. 2 and Aug. 31 after hitting
1,974 between June 10 and Aug. 1. In
early September, the Real Estate Board
of Greater Vancouver said home sales
fell 26 per cent in August compared with
the same month last year. It reported that
the composite benchmark price for all
residential properties jumped 31 per cent
to $933,100. In its report, the bank places
Vancouver ahead of London thanks to
prices that it says have risen by 25 per cent
since the end of 2014. Last year, in its first
such report, UBS rated Vancouver fourth
behind London, Hong Kong and Sydney,
in that order.
The 2016 UBS report says Vancouver’s
housing has been overpriced since 2007
but has gone into “overdrive” in the past
two years due to strong demand among
foreign investors and low interest rates.
It adds bubble risk is also high in
Stockholm, Sydney, Munich and Hong
Kong, while homes in Singapore, Boston,
New York and Milan are fairly valued.
Chicago’s housing is undervalued.