Toronto is one of seven world cities most at risk of a residential real estate bubble, according to a new report released by UBS this week.
Toronto scored 1.96 in the UBS Global Real Estate Bubble Index, the third-highest score below Frankfurt and Munich, which scored 2.26 and 2.35, respectively.
The bank’s report scores 25 cities across the world, sorting them into four tiers: bubble risk, overvalued, fair valued, and undervalued with higher scores going to locations with higher risk.
Toronto is in the bubble risk category for the third consecutive year, surpassing Hong Kong, Paris and Amsterdam.
UBS says Vancouver real estate had dropped out of bubble risk territory this year but is still overvalued, with a score of 1.37, down from 1.92 in 2018.
Other overvalued cities in the report were New York, San Francisco and Sydney, Australia with scores less than 1, while Boston, Singapore and Dubai had fair real estate values and Chicago real estate was considered undervalued.
The scores are based on how home prices compare to incomes and rents, and whether mortgage lending and construction spending are excessive compared to the growth in the overall economy.
The scores do not predict whether or when a bubble will “pop” and cause home prices to fall. The existence of a bubble, UBS said, “cannot be proved unless it bursts.”
Instead, the authors write, they are comparing present conditions with housing bubbles throughout history. UBS gives cities a score -1.5 if they are depressed, -1.5 to -0.5 if they are undervalued, -0.5 to 0.5 if they are fairly valued, 0.5 to 1.5 if they are overvalued and above 1.5 if they are a bubble risk.
For Toronto and Vancouver, UBS looked at statistics from Statistics Canada, the Bank of Canada, Sauder School of Business, Canada Mortgage and Housing Corp, Toronto Regional Real Estate Board, condos.ca and Real Estate Board of Greater Vancouver, among other sources.
Demand for single-family homes in the suburbs have pushed Toronto prices up nearly six per cent in four quarters, stretching affordability, the report said.
“Given Toronto’s robust population growth and lower mortgage rates, prices there have doubled within only a dozen years,” the report said.
“Moreover, the expected appreciation of the Canadian dollar will curb the appeal of Toronto’s property to foreign buyers when travel restrictions are lifted.”
In Vancouver, home valuations remain “sky high,” but have eased amid vacancy fees, a foreign-buyers’ tax and less immigration, UBS said. After a 10 per cent drop between 2018 and late 2019, the authors said Vancouver home prices have stabilized thanks to falling mortgage rates and rules that let potential buyers qualify for higher mortgage loans more easily.
Overall, about half of the cities in the report were either bubble risks or “significantly” overvalued. The report’s authors said that four quarters of rising real estate prices during a global recession is “unsustainable,” noting that it has been nearly 15 years since prices rose in so many global cities at once.
“It is uncertain to what extent higher unemployment and the gloomy outlook for household incomes will affect home prices…rents have been falling already in most cities,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a statement.
As the COVID-19 pandemic causes people to “reconsider where to live,” UBS predicts that there will be less demand for housing in cities.
“The rise of the home office calls into question the need to live close to city centers. Pressure on household incomes cause many people to move to more affordable suburban areas,” said UBS real estate chief Claudio Saputelli in the report.
“Already debt-ridden or economically weaker cities will have to respond to this economic crisis with tax increases or public spending cuts, neither of which bode well for property prices.”
UBS also urged first-time home buyers to consider building up wealth with a focus on more liquid assets to diversify their investments outside of their homes.
“The current cities at bubble risk seem to be weathering the coronavirus crisis relatively well. The local economies in Munich, Toronto and Hong Kong will likely recover quickly,” said Matthias Holzhey, lead author of the study.
But, Holzhey added, even if home prices don’t plunge, there isn’t much more potential for capital gains.
This report by The Canadian Press was first published Oct. 1, 2020.
Cape Breton University to honour physician and real estate tycoon – TheChronicleHerald.ca
SYDNEY, N.S. —
An oncologist and a real estate mogul will be this year’s recipients of honourary degrees from Cape Breton University.
Dr. Ronald MacCormick, oncologist, and Louis J. Maroun, real estate, will be presented with their honourary degrees during the university’s fall convocation set for Nov. 7.
“Both Dr. MacCormick and Louis J. Maroun have represented our island in their respective careers and they have impacted thousands of Cape Bretoners; one in life-saving cancer care and one in international business and philanthropy,” said David Dingwall, university president and vice-chancellor.
MacCormick is the chief medical oncologist at the Cape Breton Cancer Centre.
He completed his medical training at Dalhousie University and his specialty training at the Princess Margaret Hospital in Toronto. His highly-reputable medical practice and his role in developing the state-of-the-art regional cancer center has impacted patients from across Cape Breton Island and parts of mainland Nova Scotia.
“Although I was not born in Cape Breton, both my parents are from here and I have spent the vast majority of my career here and raised a family here. My connections to Cape Breton Island and the people I care for are deep and I am a proud promoter of Cape Breton,” said MacCormick.
Maroun was born and raised in Sydney and holds a bachelor of arts degree from the University of New Brunswick and is a Fellow of the Royal Institution of Chartered Surveyors.
Considered one of the most prolific executives in national and international real estate transactions, Maroun first began his career in real estate in 1982 after seven years with the Nova Scotia provincial government.
He has built a highly-notable career and has been dedicated to his philanthropic work with such charitable organizations as the Cape Breton Regional Hospital Foundation, the Canadian MS Society, Casting for Recovery Canada and Cape Breton University’s Shannon School of Business.
“I credit my Cape Breton roots with giving me the drive, ingenuity and determination to succeed in my business career. It also taught me the value of caring for each other during adverse times, which led to my desire to give back to my community,” said Maroun.
Cape Breton University has been awarding honorary degrees since 1989.
The fall convocation will be celebrated through a virtual platform and to view the ceremony, visit www.CBUConovcation2020.ca.
The Niagara Real Estate Trends You Need to See – RE/MAX News
How could the Niagara real estate market be better off today than it was a year ago? It’s just one more thing to add to the growing list of unprecedented phenomena dotting the 2020 timeline. The Canadian economy may be feeling the sting of pandemic-related business closures and job loses, but the housing sector is booming from coast to coast. Every segment of the industry, from the condominium market to the luxury niche, is performing well through the COVID-19 pandemic. Niagara is no exception.
Even before the coronavirus public health crisis, Niagara had been an attractive place to plant roots. Big-city dwellers may have also wanted an excuse to migrate to the southeastern region, but work and the amenities of major metropolitan cities prevented the move. With changing consumer trends and societal shifts unfolding today, many families now have their eyes set upon this municipality that blends suburban charm with city culture.
So, just how strong has the Niagara real estate market been in recent months? Several trends are emerging across the region, from declining inventories to ballooning demand. Niagara could be one of the hottest markets in Ontario real estate heading into 2021.
The Niagara Region Real Estate Trends You Need to See
According to the Niagara Association of Realtors’ (NAR) latest data, residential home sales activity surged at an annualized rate of 37.2 per cent in August, totalling 978 units. Prices also experienced double-digit gains in August, rising 15.3 per cent to $482,600 from the same time a year ago.
The other important development was the average days it took to sell a home – which was 35 days in August 2020, down from 43 days in August of 2019.
Terri McCallum, President of NAR, attributed the robust growth to steady inventory levels and multiple offers on listed properties.
Despite the steady increase in property values, Niagara remains one of Ontario’s most affordable markets, according to the 2020 RE/MAX Housing Affordability Report. For a long time, a large chunk of demand for Niagara real estate had been driven by retirees. However, with more professionals working from home, remote workers have been elevating demand and taking advantage before housing prices increase even further.
But how much more is the Niagara real estate market expected to grow? The RE/MAX Fall Market Outlook Report estimated that Niagara real estate could increase as much as six per cent in the remainder of 2020, which is roughly in line with broader Ontario real estate market performance in the final quarter of the year.
What Is Driving the Niagara Real Estate Market?
Niagara is another community benefiting from the growing trend of families leaving major urban centres and planting roots in small towns. Whether it is due to fears over hyper-dense cities or employers introducing work-from-home policies, people are choosing to live in areas other than Toronto and Hamilton. This allows them to save money on housing and enjoy more square footage for their dollars.
Like nearly every other market in Canada, Niagara is seeing a flood of homebuyers amid historically low interest rates. At the height of the coronavirus pandemic, the Bank of Canada (BoC) slashed interest rates to nearly zero per cent. Further, the Bank lowered the conventional five-year mortgage rate to below five per cent. Put simply, borrowing has never been cheaper, so homebuyers are taking advantage of this accommodative monetary policy and jumping into the market or upgrading their living space.
The lure of the Niagara region is undeniable; it is not hard to see why it remains a favourable destination for tourists and residents alike. Beyond hosting one of the seven natural wonders of the world, Niagara’s rich cultural community and natural sights offer enough to keep you busy year-round:
- The city boasts 101 wineries that churn out delicious Chardonnays, Gamays and Pinot Noirs.
- The region’s long summers and moderate winters are perfect for enjoying the 42 conservation areas, like Ball’s Falls.
- Farms and farmers’ markets offer up some of the best produce in the province.
- The many different festivals, including the Grape and Wine Festival, the Niagara Jazz Festival, and, of course, the Shaw Festival have historically been well-attended by tourists and local residents.
Is Niagara part of the near-term cash injection from impetuous borrowers who have decided to flee the Greater Toronto and Hamilton Area following the height of the pandemic? Or is the Niagara Region’s booming housing market part of a long-term trend? Indeed, Niagara’s trends are consistent with so many municipalities within the southeastern part of Ontario, many of which are projected to keep expanding for many years to come. Based upon its strong appeal and sound market fundamentals, the Niagara real estate market has more room for growth as we edge towards 2021.
Canadian Real Estate Is Becoming More Bubbly According To The US Federal Reserve – Better Dwelling
The world’s largest central bank is seeing the warning signals for Canadian real estate get brighter. US Federal Reserve (US Fed) updated their exuberance indicators for Q2 2020. Their measures for Canada show recent acceleration over the past two quarters. There was a brief period in the data where it appears Canada almost came back to reality. In the first quarter of this year though, buyer’s became more exuberant.
Exuberance Is Not A Fundamental
First, let’s quickly run through the concept of exuberance. Exuberance is the state of being excited. When used in economics, it means emotion and excitement is the driving mechanism. If a buyer is said to exuberant, they are buying not based on any fundamental reason – but rather their emotional reasoning. In other words, they’re paying more based strictly on the fact they think they should be paying more. Not because any fundamental basis is driving the valuation higher.
Exuberance doesn’t mean markets can’t or won’t go higher. Markets driven by an emotional state are more vulnerable to correction though. If buyers aren’t using fundamentals, then a sudden change in emotion means they need to discover the actual price floor. That’s sometimes a ways down.
Canadian Real Estate Becomes More Exuberant
Canada is seeing exuberance accelerate over the past few quarters. The indicator reached 1.89 in Q2 2020, up from 1.56 during the same quarter last year. The market has seen two consecutive quarters of acceleration.
Canadian Real Estate Buyer Exuberance
An index of exuberance Canadian real estate buyers are demonstrating, in relation to pricing fundamentals.
Source: Federal Reserve Bank of Dallas, Better Dwelling.
Canadian real estate has been consistently in this level for years, but not as many as some people want you to think. It first breached the critical threshold in Q1 2015, and hasn’t fallen below that level since. There’s been a few periods where it almost has, which have been followed by policy moves to prop up the market. Technically the market has only been exuberant for half a decade. Although that may feel like forever, it’s not really that long.
The Federal Reserve warns this indicator doesn’t tell us when we’ll see a correction, just the likelihood of one. After 5 quarters above the critical threshold, the Reserve believes markets will require a correction. The longer this trend persists, the further detached the market is from fundamentals. This means a larger correction will be required, whether in terms of falling prices or inflation that kills the real value.
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