Monday, October 1, 2018

In Canada's top markets, neither rent nor ownership provides relief.

The extent to which home prices have soared in Canada’s most in-demand markets is most starkly illustrated in an annual study released late last week by Swiss multinational investment bank UBS. The report found that median earners in Toronto’s skilled labor force would need more than 6 years’ worth of their salaries to buy a home at the average price point, and 25 years of rental to make up for the cost of an investment property. Meanwhile, the figures in Vancouver are 9 and 34 years, respectively. “Investors anticipate being compensated with capital gains for overly low rental yields,” UBS said, as quoted by CBC News. “If such hopes do not materialize and expectations deteriorate, homeowners in markets with high price-to-rent multiples are likely to suffer significant capital losses.” UBS identified Toronto and Vancouver, along with 4 other cities elsewhere in the world, as fundamentally unstable housing bubbles that might spell significant trouble for their respective national economies in the near future. In its analysis encompassing salaries, home and rental prices, mortgage debt, and several other factors, UBS scored Toronto a 1.95 and Vancouver a 1.92. For perspective, any city above 1.5 has a housing market that is considered extremely overvalued and already well into bubble territory.

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