Canada has the Most Overvalued Housing Market in World (2024)

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Canada has the Most Overvalued Housing Market in World? ›

The Economist, in January, referred to the Canadian market as the most overvalued in the world, using a price-to-rent ratio of 78% to make that claim. The ratio compares the relationship between the costs of buying versus renting.

Formerly in the bubble risk zone, Toronto, Frankfurt, Munich, Hong Kong, Vancouver, Amsterdam, and Tel Aviv, are now all in the overvalued territory. Unchanged from the previous year, housing markets in Miami, Geneva, Los Angeles, London, Stockholm, Paris, and Sydney also continue to be overvalued.

The agency estimates Canadian real estate prices were 29% overvalued at the end of 2022.

After more than a year of Atlanta dominating the list of most overvalued housing markets, Detroit is now the most overpriced market in the United States, according to researchers at Florida Atlantic University and Florida International University.

Immigration. The influx of new immigrants to Canada increases the demand for housing, driving up house prices as supply struggles to meet this growing demand. This inflow is especially true in cities such as Toronto and Vancouver, which have seen some of the highest rates of immigration in recent years.

Homes there are 11.72% percent overvalued, compared to the market's peak of 46.7% in June of 2022. "Housing prices can and will re-stabilize. The only question is how local home prices will return to a given area's long-term pricing trend," said Eli Beracha, Ph.

The top three least affordable housing markets are located outside of the U.S.. These markets include Hong Kong, China, Sydney, Australia, and Vancouver, Canada.

Hodgson said, “The chief reason Canada's housing is more expensive is the greater barriers to entry for new construction: more urban containment, lengthier approval processes and costlier licensing. Any reduction in supply elevates the market price.”

The problems with Canada's housing market have spread beyond major cities like Toronto and Vancouver to smaller communities across the country. Vacancy is low, houses are prohibitively expensive for many Canadians, and even rental prices have spiked an average of nearly 9% over the past year.

In April 2023, Moody's Analytics released an in-depth report that assessed the struggles ahead for Canada's housing market. The economists noted that real estate markets have been “uneven across provinces.” So, Toronto and Vancouver are prime examples of an overvalued region.

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The most overvalued markets to purchase a home tend to be located along the California coast, as well as in tourist-popular Hawaii, tech-heavy Seattle and holdover “Zoomtowns” in Colorado, Idaho and Utah.

The Principality of Monaco is the undisputed leader in the global real estate market. The value of housing is due to the combination of a tiny area with a high population density. A large number of multimillionaires and titled persons live here.

Key contributors to this high cost include soaring housing prices in cities like Vancouver and Toronto, inflated expenses for essentials such as groceries, utilities, transportation, and healthcare, and notably expensive internet services.

An economic expert believes that the possibility of a more severe crisis in Canada's housing market remains a possibility because real estate remains "really overvalued."

Investors were responsible for 30 per cent of home purchases in the first three months of the year, according to data released by the Bank of Canada. That is up from 28 per cent in the first quarter of last year, and 22 per cent in the same period in 2020.

Unsurprisingly, the nation's two largest cities — New York and Los Angeles — have the largest estimated overall housing shortages at roughly 390,000 and 337,000, respectively. Between 2021 and 2022, New York City's housing shortage increased by more than 3.5%, according to Zillow.