Average house prices rose 14 per cent in the past year, the Canadian Real Estate Association said Friday, adding to concerns that Canada’s most expensive real estate markets are heavily overvalued.
The group that represents realtors across the country says the average price of a Canadian home sold on its MLS system was $686,650, almost 14 per cent higher than it was in the same month a year ago.
Canada’s inflation rate hit four per cent in August, the fastest increase in the cost of living in almost 20 years. The new data on house prices Friday shows that prices are going up at more than three times that pace.
CREA says the average price can be misleading, since it is heavily skewed by sales in the most expensive markets of Toronto and Vancouver. It trumpets another number, known as the MLS House Price Index (HPI), as a more accurate gauge of the overall market, because it strips out some of the volatility.
The above numbers came as a major Swiss bank was already warning that Toronto and Vancouver are home to two of the worst housing bubbles in the entire world.
In an annual ranking, UBS examines the housing markets in 24 major world cities in Europe, North America and Asia to assess them based on how expensive housing is compared to local income levels and other factors.
It then puts all the cities into one of five categories:
- Depressed housing market (a score of -1.5 or lower).
- Undervalued (-0.5 to -1.5).
- Fairly valued (-0.5 to +0.5).
- Overvalued (+0.5 to +1.5).
- Bubble (1.5 and up).
Six cities were deemed to have housing bubbles. Two of them are in Canada.
Toronto got a score of 2.02. That was higher than every other city except Frankfurt, Germany, which scored a 2.16.
Vancouver scored a 1.66, just behind Hong Kong (1.90), Munich (1.84) and Zurich (1.83).