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Canada Housing Market Now at the Top of the Most Overvalued in the World


The Economist showed in a recent study that Canada’s housing is at the top of the list for the most overvalued houses in the world in rental rates, and third for most overvalued in comparison to incomes.


A survey by the Economist published this weekend points to Canada and Australia as being the two top countries “where prices seem most out of kilter.” 


In residential real estate Canada has been ranked close to the top for 5 years but never at the top until now as Australian and northern European countries have been experiencing unstable housing prices recently.


Thanks to the most recent edition of The Economist we now see that house prices in Canada are at 89-percent overvalued with comparisons to rents, this marks the changes from two years ago when the house prices were at 73 percent. Placing Canada at the top for most overvalued among all of the 26 housing markets measured.


In this survey The Economist also looks at incomes against house prices and we see that Canada’s house prices are third worldwide for being too high at 35 percent. Only topped by Belgium at 50 percent and Australia at 39 percent.


Even the Bank of Canada is concerned with our country’s overpriced housing, and also with the amount of unstable mortgage lending’s taking place.


Canada isn’t the only country with unstable mortgages raking up though as was observed by The Economist regarding the real estate markets around the world, “a single unifying theme is the cheapness of borrowing.”  For “in their efforts to support weak global demand, central bankers have kept monetary policy ultra-loose. That has left mortgage rates at historic lows.” 


As clearly shown in Canada with our rising household debt levels of above 163 percent per household income, and our mortgage rates dropping drastically as shown by one lender bringing in a fixed-rate mortgage at 1.49 earlier this year.


This has increased our home prices despite the slowing of our economy due to low oil prices, with the average prices for houses in Canada hitting $439,000 in April of last month. At total rise of 9 percent in a year.


Debating has been going back and forth between economists and banks as there is talk of a correction or “soft landing” that is due to come as a result of these high house prices.  According to some, it isn’t due to happen for a few years, but according to the Royal LePage last week this “soft landing” may have already arrived due to shrinking prices with most markets.


As of right now what we do see is rising house prices and sales in Vancouver and Toronto, and according to the Toronto Real estate Board, for the first time the average price for a single-family home shot above $1 million this year.


Solid proof that the demand for residential properties, especially detached, in our cities is continually on the rise.

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