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A new report suggests Canada is home to the most overvalued housing market in the world.
Deutsche Bank estimates that house prices in Canada are overvalued by 60 per cent — the highest among all 20 developed countries studied. (Tweet this)
The study, by Deutsche economists Peter Hooper, Torsten Slok and Matthew Luzzetti, ranks each housing market based on the average of two ratios: home prices to rent and home prices to income.
Deutsche says in Canada, prices to rent are 88 per cent above the historical average while prices to income are 32 per cent above the historical average.
As the Globe and Mail reports:
The study also looks at price bubbles in most OECD nations before the financial meltdown, but cites the fact that Canada, Norway and Australia “have not experienced a burst … yet.”
Among its more notable findings is that, based on the median house price to median household income, Vancouver is more expensive than New York. Toronto, in turn, is just behind the Big Apple.
But the German bank’s ominous warning about Canada not “yet” experiencing a crash runs counter to domestic housing market predictions.
On Tuesday, the Bank of Canada predicted a soft landing for the country’s housing market, while earlier Wednesday, Re/Max forecasted an exceptionally healthy year for Canadian real estate in 2014.
For more on the Deutsche study, read the Globe and Mail article here.