Toronto has emerged as the world’s second most overvalued housing market on the back of low rates and supply shortages, according to UBS AG’s annual global real estate bubble index.
“A major price correction seems unlikely in the short term given improving mortgage conditions, a weakening Canadian dollar and falling supply,” the bank said. Despite the housing bubble risks in Canada’s largest cities and lower interest rates globally, UBS said it sees a correction phase emerging worldwide due to burdens that buyers face in meeting mortgage payments, qualifying for bank loans in the first place and weathering the impact of economic uncertainty on demand growth.
Globally, the bank said price growth rates have continued to slow in a majority of cities and average price growth stagnated for the first time since 2012. Lending is matching gross domestic product growth for the most part in contrast to the years before the 2008 financial crisis when outstanding mortgage volumes increased at as much as 2.5 per cent faster than GDP, UBS said.
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