![\"vancouver](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2016\/09\/vancouver-housing-bubble.jpg\")
<\/a>Photo: <\/span><\/i>Martin Thomas\/Flickr<\/span><\/i><\/a><\/p>\nWorried about the Vancouver housing market? According to Swiss global financial services firm UBS, maybe you should be. The latest data<\/a> from its UBS Global Real Estate Index, released September 27th, shows that the city has the highest \u201cbubble risk\u201d in the world. <\/span><\/p>\n The firm defines a bubble as \u201ca substantial and sustained mispricing of an asset,\u201d and notes that bubbles are a recurring phenomenon in housing markets across the world. Now in its second year, the index includes data on 18 cities and is designed to track the risk of these bubbles in global financial centres \u2014 a score of above 1.5 indicates \u201cbubble risk,\u201d while at the other end of the scale a score under -1.5 represents a \u201cdepressed\u201d market. <\/span><\/p>\n A slew of factors combined to push Vancouver to the top score of 2.14 this year. UBS notes that its housing market has been \u201csignificantly overvalued\u201d since 2007 and kicked into overdrive at the end of\u00a02014. Since then, real home prices in the city have increased by 25 per cent, driven upward by high demand from foreign investors and \u201cloose credit conditions,\u201d particularly low interest rates.<\/span><\/p>\n \u201cThe risk of a substantial price correction appears very elevated,\u201d the firm says.<\/span><\/p>\n Aside from Vancouver, \u201cbubble risk\u201d is evident in five other cities worldwide: London, Stockholm, Sydney, Munich and Hong Kong. They received index scores of 2.06, 1.92, 1.7, 1.59 and 1.52, respectively. Interestingly, despite being very different cities, all five were pushed into \u201cbubble risk\u201d territory by circumstances similar to those seen in Vancouver \u2014 low interest rates and high demand from foreign buyers. Steady supply has also played a role. <\/span><\/p>\n \u201cIt is hardly any wonder that housing markets are again overheating, just a few years after the last major wave of a global correction,\u201d UBS quips.<\/span><\/p>\n That said, it\u2019s worth noting that even UBS\u2019 most at-risk cities aren\u2019t necessarily headed straight for house price corrections. As the firm notes, it\u2019s impossible to conclusively prove the existence of a bubble until it pops. What\u2019s more, \u201c[e]ven in the cities with the clearest signs of a real estate bubble, it is not possible to predict exactly the timing and duration of a correction.\u201d <\/span><\/p>\n Speaking to CBC News<\/span><\/a>, Jon Woloshin, strategist at UBS Wealth Management Americas, confirmed that idea, commenting that Vancouver\u2019s high index score doesn\u2019t guarantee that it\u2019s set to experience an extreme correction in housing prices. \u201cBased on the different criteria that were factored into all these major markets, as we sit here today, Vancouver on a risk-reward basis scored the lowest, which is why it’s at the top,\u201d he said.<\/span><\/p>\n However, he added that the index was put together using Vancouver data collected only as recently as this spring. That means it doesn\u2019t take the city\u2019s <\/span>new 15 per cent foreign buyers tax<\/span><\/a> into account. For Woloshin, the tax, which has already been credited with <\/span>significantly reducing<\/span><\/a> foreign housing deals in the city, is a bit of a wild card. <\/span><\/p>\n \u201cIf the government cracks down and really goes after it, yeah, I think it will have an impact,\u201d he said, adding, \u201c[i]f a lot of smart lawyers get involved, maybe it becomes less of an issue.\u201d For now, he and UBS are simply urging buyers to be cautious in Vancouver and the other at-risk cities. <\/span><\/p>\n But the report doesn\u2019t take the city\u2019s new 15 per cent foreign buyers tax into account. <\/p>\n","protected":false},"author":49,"featured_media":156747,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","apple_news_api_created_at":"","apple_news_api_id":"","apple_news_api_modified_at":"","apple_news_api_revision":"","apple_news_api_share_url":"","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_is_hidden":false,"apple_news_is_paid":false,"apple_news_is_preview":false,"apple_news_is_sponsored":false,"apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"footnotes":""},"categories":[11269],"tags":[],"coauthors":[10332],"apple_news_notices":[],"yoast_head":"\n<\/a>Graphic: <\/span><\/i>UBS<\/span><\/i><\/a><\/p>\n<\/a>Graphic: <\/span><\/i>UBS<\/span><\/i><\/a><\/p>\n