Toronto is the city most at risk of bursting a real estate bubble in the world, according to an international report.
The Swiss bank UBS’s international housing bubble index has ranked the world’s 25 largest cities according to the risk of market collapse, and Toronto, followed by Frankfurt and Hong Kong have very high risks due to imbalances in the real estate market, according to the “Toronto Star”.
A bubble occurs when local property prices rise rapidly due to high demand and speculation, to the point where they are no longer supported by economies.
In the case of Canada, low interest rates during the pandemic have helped fuel a huge power surge that is growing the bubble that could burst, as the Bank of Canada continues to raise interest rates to slow the inflation, according to the study.
UBS’s annual report assigned a housing market index to 25 cities, with an index above 1.5 indicating that a city is likely experiencing a bubble.
The City of Toronto received an index of 2.24 and that of Vancouver an index of 1.70, making them the two cities most at risk in North America.
“Imbalances are very high in the two Canadian cities analyzed, according to the report, which also noted that real estate price levels in Vancouver and Toronto “have more than tripled in the last 25 years”.
Overall, home prices rose 14% in Vancouver and 17% in Toronto from a year ago, the study found.