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The Canadian Real Estate Association (CREA) said on Friday that average house prices have risen 14% over the past year, adding to concerns that the Canadian housing market is dangerously overvalued. At the same time, UBS also issued a warning about Canada’s real estate bubble.
Among the six cities with a serious real estate bubble in the world, two major cities in Canada, Toronto and Vancouver, are on the list.
According to the English media CBC News, CREA, an organization representing national real estate agents, said the average price of a Canadian house sold on its MLS system was C $686650, nearly 14% higher than in the same month a year ago.
Canada’s inflation rate reached 4% in August, the fastest cost of living in the last 20 years. Friday’s new house price data means that house prices are rising more than three times as fast as previously recorded.
CREA said the surge in house prices was mainly due to the fact that the two most expensive cities, Toronto and Vancouver, had seriously affected average prices.
In addition, a data called house price index (HPI) in the MLS system can more accurately measure the price level of the whole market. But the data show that HPI has risen 21.5% in the past December, which is even higher than the current average.
In the Greater Toronto area, the average selling price of a house in September was C $1136280, up 18% in a year, according to the local real estate board. In addition, in Vancouver, the average selling price is C $1186100, more than a 13% increase last year.
Cliff Stevenson, chairman of CREA, said: “there is still a lot of demand waiting for the increasingly scarce number of listings, so the real estate market is still very challenging.”
The epidemic has also had an unexpected impact on house prices, because instead of making people more conservative in consumption, economic uncertainty has made people eager to buy more houses.
The Bank of Canada has also spurred the economy by slashing benchmark interest rates. When lenders pass on to consumers at historically low mortgage rates, it is undoubtedly adding fuel to the otherwise hot housing market, making people more willing to borrow money to buy homes.
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.
In the annual ranking, UBS surveyed the housing markets of 24 major cities in Europe, North America and Asia and assessed and compared them based on factors such as house prices and local income levels.
One of these cities has a real estate bubble in the heat, and two are in Canada.
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.
“from mid-2020 to mid-2021, real prices rose by nearly 8 per cent.”
UBS also revealed that record ultra-low mortgage rates are driving up prices and are not expected to last long once Canadian banks have to raise interest rates. This “could suddenly end the current real estate boom.”
The severe housing bubble in Toronto has also had a serious impact on potential local buyers.
Isabel Serrano, who lives in Toronto, says she and her husband have been renting for 15 years and are finally ready to buy a house. However, although they earn more than C $200000 a year, they still cannot find a suitable house within their expected price range because the offer is always outrageous.