Photo: Bernard Spragg. NZ/Flickr
Canadian homes are some of the highest valued in the world, according to a new report from Oxford Economics.
As per Oxford Economics’ OECD House price valuations measure, only New Zealand — which was identified as a possible risk hotspot for its untamed price growth despite an already-high valuation — had more highly valued homes in the second quarter of this year.
Unlike New Zealand, however, Canadian inflation-adjusted home prices are falling.
“Trends across economies are very varied – price growth is rapid in Hong Kong, the Netherlands and Mexico but negative in Canada, Italy, Brazil, Turkey and Sweden,” reads the report authored by Adam Slater, the lead economist for Oxford Economics.
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Overall, price growth was positive globally, albeit at a more subdued rate than previously recorded. Home prices increased 2.7 per cent annually, slowing from the 4 per cent pace observed in 2017’s second quarter, according to Oxford Economics’ world house price indicator based on more than 20 markets around the world.
“This is a little higher than the long-term average trend, and so still broadly supportive of global growth,” writes Slater.
The economist notes how although valuations have yet to reach the 2006–2007 peak, their current elevated level is nevertheless putting a lid on price gains in some markets, which poses a risk to the global economy.
“If we compare valuations to real price growth, we can see a negative relationship: price growth looks weakest in highly valued markets,” Slater notes.
In the case of Canada and a handful of other countries, there is more at play than high home values in terms of capping prices.
“It is likely that high valuations plus tighter monetary conditions have played a key role in the sharp slowdown in price growth in the UK, Australia, Canada and Sweden in the last year,” the report states.
At the onset of the year, the federal government tightened lending policy by expanding stress testing to uninsured mortgages. Previously, homebuyers had been able to sidestep stress testing by putting forward a downpayment of 20 per cent for an uninsured mortgage.