Vancouver real estate market tops housing bubble risk: bank

VANCOUVER — When it comes to overpriced real estate, Vancouver’s “bubble risk” is unmatched on the planet, according to a report by Swiss bank UBS.

The rise in Vancouver’s average housing prices compared with the growth in average wages, rents and other economic factors make it the most likely to experience a sudden downward correction compared with 17 other large cities around the globe, according to the UBS Global Real Estate Bubble Index released this week.

The report also warned that investors are less likely to see growth in property value in high “bubble risk” cities.

Jon Woloshin, strategist at UBS Wealth Management Americas, said the report doesn’t mean Vancouver is likely to experience a home-price correction like the U.S. housing crisis that contributed to the 2008-09 recession. Rather, it’s meant as a cautionary signal for potential real-estate investors.

“Based on the different criteria that were factored into all these major markets, as we sit here today, Vancouver on a risk-reward basis scored the lowest, which is why it’s at the top,” he explained.

He added that the province’s move to control the city’s overheated housing market by imposing a 15 per cent tax on foreign buyers of homes in Metro Vancouver as of Aug. 2 could reduce its bubble risk rating.

The UBS report was based on Vancouver data up to last spring, before the foreign buyers’ tax was implemented. “If the government cracks down and really goes after it, I think it will have an impact,” Woloshin said. “If a lot of smart lawyers get involved, maybe it becomes less of an issue.”

In its report, the bank places Vancouver ahead of London thanks to prices that it says have risen by 25 per cent since the end of 2014. Last year, in its first such report, UBS rated Vancouver fourth behind London, Hong Kong and Sydney, in that order.