Scenic view at Toronto city waterfront skyline at sunset
© Elena Elisseeva / 123RF Stock Photo

Toronto and Vancouver remain among the most overvalued housing markets in the world, according to a new report from UBS Global Wealth Management.

The firm ranked Toronto as the second most overvalued market in the world, behind Munich, according to the latest edition of the UBS Global Real Estate Bubble Index, which analyzes residential property prices in 24 major cities.

Vancouver’s housing market, ranked the seventh most overvalued, remains in bubble territory too, despite a decrease in the market’s overvaluation since 2018.

UBS reported that, on average, inflation-adjusted housing prices have held steady over the past year. Prices declined notably in several cities, including Vancouver, Sydney and Dubai.

“Mortgage interest rates in many cities aren’t the major challenge for house buyers anymore. Many households simply lack the funds required to meet the banks’ financing criteria, which we believe poses one of the biggest risks to property values in urban centers,” Claudio Saputelli, head of real estate at UBS Global Wealth Management, said in a statement.

“Investors should remain cautious when considering housing markets in bubble risk territory,” said Matthias Holzhey, head of Swiss real estate investments at UBS Global Wealth.

“Regulatory measures to curb further appreciation have already triggered market corrections in some of the most overheated cities,” he added, noting that the four most overvalued cities in the 2016 edition of the index have seen prices fall.

“On average they are down by 10% from their respective peaks and we don’t see this trend reversing.”

UBS also said that while owning residential property in global cities has been a certain route to gaining wealth, overvalued markets favours shifting jobs to the suburbs.

“Even though, the underlying factors favouring city properties, including urbanization, the digital revolution and artificial supply constraints, still hold good, real price appreciation can no longer be taken for granted,” UBS said.