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In Canada, real estate prices have grown almost twice as fast in the past year as in the United States. Since 2005, Canadian house prices have risen by 140%. Compared with the 15.3% increase in the United States, the growth rate of house prices in Canada is 819%, or 8.19 times that of the United States. Nothing else in the G7 can be compared with Canada.
Canadian real estate prices have increased dramatically over the past year. Real house prices rose 0.8% in the third quarter of 2021 and are now 21.4% higher than in the same period last year.
Other advanced economies are seeing the price increases that triggered the crisis, but they are very different from those in Canada. Canada’s 21.4% annual growth rate is almost double the 11.6% annual growth rate of the United States in the same period.
The second highest rate of house price growth among the G7 countries is Germany, where house prices rose by 49%, only 1/3 of that of Canada.
The Fed also said that the Canadian real estate market can no longer judge by common sense and that the risk is ridiculously high.
But the Bank of Canada did nothing in the face of the world’s busiest real estate market without warning, while the Bank of Canada continued to maintain loose credit policy to ensure that the market took advantage of low interest rates to keep house prices higher.
If it rises outrageously, it is bound to collapse one day. And Swiss banks have warned: beware of real estate bubbles in Toronto and Vancouver!
Recently, UBS released its annual research report, “UBS Global Real Estate Bubble Index 2021”, and six cities around the world are considered to have a real estate bubble.
Among them, Toronto and Vancouver are the two most serious real estate bubbles in the world. Toronto ranks second and Vancouver sixth.
Toronto ranked second with a score of 2.02, second only to Frankfurt, Germany, with 2.16. Vancouver scored 1.66, second only to Hong Kong (1.90), Munich (1.84) and Zurich (1.83).
House prices in Toronto have doubled in the past decade, UBS said. Government intervention through measures such as foreign buyers’ taxes and rent controls led to a slight easing in the housing market in 2018 and 2019, but will soon accelerate.
According to UBS, it will take a long time for anyone who wants to invest in a property to rent out the purchase price. It takes 28 years in Toronto and 31 years in Vancouver.
When Canadian banks raise their benchmark overnight interest rates, house prices in some markets could fall by as much as 20%, said Peter Routledge, a Canadian financial institution regulator.
Routledge added: “in some markets, if your price rises rapidly, then you may see a 10% or 20% drop later. I don’t want to say that this is a normal phenomenon, but a phenomenon that returns to reason after a sudden accumulation of prices.”