In its last quarterly assessment of major Canadian real estate markets, Canada Mortgage and Housing Corporation flagged Vancouver for showing signs of being overvalued.
Now, news magazine the Economist has put a number to it.
In its Global Cities House-Price Index, the Economists’ data team pegged the Vancouver market as being 65 per cent overvalued.
The Economist looked at 22 global cities and found Vancouver was the fifth most overvalued. Only Hong Kong, Brussels, Paris, and Auckland surpassed it.
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To determine whether a city was overvalued, data analysts compared rents and median incomes to home prices, drawing on a vast number of local sources.
The index-topping Hong Kong market was 94 per cent overvalued. Auckland, the biggest city in New Zealand, where lawmakers recently decided to ban foreigners from buying homes in most cases, followed at 75 per cent.
Paris and Brussels were deemed overvalued by 70 per cent and 67 per cent, respectively.
“The three reasons why cities have experienced a property boom — and why it may now be ending — are demand, supply and the cost of money,” writes the Economist.
Just Tokyo and Singapore were considered undervalued, but the average rate of home price inflation for the 22 indexed cities is cooling.
The Economist suggests one factor that may contribute to the end of the global house price runup is reduced demand as more and more people are priced out of major cities.
No other Canadian cities were included in the index, but the Economist says Canada’s national house prices are more than 20 per cent above fair value when stacked up against income.
Since the first quarter of the year 2000, house prices in Vancouver have soared 203 per cent, according to the Economist.
The Economist says “large inflows” of foreign investors have boosted demand in Vancouver.
According to Statistics Canada, non-residents own about 7 per cent of the residential properties in Metro Vancouver.