Toronto among global cities most at risk of housing bubble, new report suggests

Toronto’s housing market is “overvalued” beyond reason, according to a new report from a top Swiss bank

Toronto among global cities most at risk of housing bubble, new report suggests
Toronto is among the global cities most at risk of a housing bubble as economic optimism and low borrowing costs continue to push up property values in urban areas worldwide, according to UBS Group AG.

The Canadian city, which entered the index of 20 locations for the first time this year, has the most overvalued housing market, the Swiss bank stated in a report published earlier this week.

Vancouver and Sydney were also in the top five in terms of risk. Chicago was the only undervalued city in the study, with three-quarters of them in danger of a bubble or overvalued, the UBS report said.

“Improving economic sentiment, partly accompanied by robust income growth in the key cities, has conspired with excessively low borrowing rates to spur vigorous demand for urban housing,” according to Claudio Saputelli, head of global real estate for UBS Wealth Management’s chief investment office.

Meanwhile, London, U.K. was the third-riskiest in Europe after Stockholm and Munich.

“The situation in London’s housing market is relatively uncertain right now -- nobody wants to burn their fingers,” UBS economist and report co-author Matthias Holzhey told Bloomberg. “There are more attractive places to invest in Europe, for example Frankfurt or Milan.”

Buyers are betting that the world’s top cities will continue to outperform national housing markets. Together with demand from international buyers—particularly those from China—the world’s leading cities have seen average price growth of almost 20% over the past three years, the UBS data showed.

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