The Most Overvalued Housing in the World

December 16, 2013

Homes in Canada are overvalued by 60 percent, according to a new report from Deutsche Bank that looks for the most overvalued housing markets among 20 developed countries. This makes Canadian homes the most overvalued in the world, according to the study. The study compares housing prices to historical norms.

When compared to rent, home prices in Canada were found to be 88 percent overvalued. In terms of income levels, home prices compared were found to be 32 percent overvalued, according to the Deutsche Bank study.

“It's true, housing does look very overvalued in Canada, particularly here in Toronto and in other major cities like Vancouver for example,” says David Madani of Capital Economics.

The Bank of Canada recently warned that high household debt levels—which have been rising with increasing home prices—are one of the country’s biggest economic risks. However, many real estate professionals there are not seeing reason for alarm.

“There's no bubble,” Desmond Brown of Royal Lepage told CBC News. "We have the low interest rates, we have the immigration of 100,000 people coming into Toronto every year; there's no bubble in Toronto.”

A newly-released RE/MAX survey projected that average home prices in Canada will rise 3 percent in 2014 to average $390,000. That would follow a 4 percent increase in home prices this year. 

Some of the countries found to have the most overvalued housing, according to the study, are: 

  • Canada: 60%
  • Belgium: 56%
  • New Zealand: 51%
  • Norway: 49%
  • Australia: 40%
  • France: 33%
  • U.K.: 31%
  • Sweden: 24%
  • Finland: 22%
  • Spain: 16%

Meanwhile, the U.S. was found to be undervalued by 6 percent. The most undervalued real estate is found in Japan, which is undervalued by 39 percent. 

Source: “Canada Has Most Overvalued Housing Market: Deutsche Bank,” The Huffington Post Canada (Dec. 11, 2013) and “Canadian real estate most overvalued in world, study says,” CBC News (Dec. 12, 2013)

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