18 Mar Did You Place Your Bet Yet?
When the pandemic hit in early 2020, the real estate market came to a screeching halt. Buyer showings were non-existent and For Sale signs loomed on lawns like a tumbleweed blowing down a deserted street in a scene from an old Western. If you were one of the many (including myself) willing to bet that this would drive down real estate prices, you would have been wrong. Based on data from the UBS Global Real Estate Bubble Index, from mid-2020 to mid-2021, real house-price growth in major cities around the world hit an increase of 6%, at the time the highest level since 2014.
In cities like Vancouver and Stockholm, prices jumped by double digits. The UBS study illustrates how much the cost of buying a modest apartment has changed over the past 10 years in 25 cities. Though Hong Kong has the highest average cost per apartment, Frankfurt and Toronto rank even higher for “bubble risk,” according to UBS, which based their findings on decoupling from local incomes and rents.
It’s no secret that real estate values are far outpacing the growth of family income. The argument that GTA housing is in a bubble has been whispered over the past 20 years. And yet, here we are, with a few ups and downs over the years but mainly ups. Low interest rates continue to fuel the housing demand and a shortage of inventory is creating a competitive buyer landscape like no other. The best recent example to offer is a property that received 45 offers and hosted 170 showings before selling for an unprecedented price.
So, are we in the making of a real estate bubble? Perhaps. Immigration will be an important factor to watch in 2022 and in the following years. More and more people want to live in our country and they are going to need a place to live. Are you ready to place your bet?
Source: Fortune December 2021/January 2022
UBS Global Real Estate Bubble Index