According to a report by Swiss bank UBS, when it comes to overpriced real estate, Vancouver’s “bubble risk” is unmatched on the planet.
According to the UBS Global Real Estate Bubble Index released this week, the ascent in Vancouver’s average housing costs with the growth in average wages, rents and other economic factors make it the destined to encounter a sudden descending rectification compared with 17 other vast cities around the world. The report likewise cautioned that investors are less inclined to see growth in property value in high “bubble risk” cities.
Jon Woloshin, strategist at UBS Wealth Management Americas, said the report doesn’t mean Vancouver is likely to encounter a home value correction like the U.S. housing crisis that added to the 2008-09 recession. Or maybe, it’s implied as a preventative sign for potential real estate investors. He added that the province’s move to control the city’s overheated housing market by forcing a 15% tax on foreign purchasers of homes in Metro Vancouver as of Aug. 2 could diminish its bubble risk rating.
“Based 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,” he explained.
The UBS report was based on Vancouver data up to the previous spring, before the foreign purchasers’ tax was implemented.
“If the government cracks down and really goes after it, yeah, I think it will have an impact,” Woloshin said in a telephone interview from New York. “If a lot of smart lawyers get involved, maybe it becomes less of an issue.”
A week ago, the British Columbia government credited its new tax in reporting that housing deals in Vancouver including foreign purchasers dropped to 60 between Aug. 2 and Aug. 31 in the wake of hitting 1,974 between June 10 and Aug. 1. Toward the beginning of September, the Real Estate Board of Greater Vancouver said home deals fell 26% in August compared with that month a year ago. It reported that the composite benchmark cost for all residential properties bounced 31% to $933,100.
In its report, the bank places Vancouver in front of London because of costs that it says have ascended by 25% since the end of 2014. A year ago, in its first such report, UBS rated Vancouver fourth behind London, Hong Kong and Sydney, in a specific order.
The 2016 UBS report says Vancouver’s housing has been overpriced since 2007 yet has gone into “overdrive” in the previous two years because of solid interest among foreign investors and low interest rates. It includes bubble risk is additionally high in Stockholm, Sydney, Munich and Hong Kong, while homes in Singapore, Boston, New York and Milan are genuinely esteemed. Chicago’s housing is underestimated.