Only London, Hong Kong and Sydney rank higher on the list, although both London and Hong Kong fall within the bubble risk zone.
In the report, UBS said: “Cities at or near the bubble risk zone face a higher risk of a large price correction.”
Vancouver’s high price-to-rent ratio suggests an “undue dependence of housing prices on low interest rates,” says the bank.
Many commentators blame overseas influences for the soaring prices, such as investors from Asia purchasing properties in the city and driving prices up, with locals finding it hard to get onto the property ladder.
However, the Canada Mortgage and Housing Corporation in its housing market assessment report, also released last week, only found moderate evidence of the over-valuation in Vancouver. The report instead flagged Toronto, Quebec and Montreal as cities with a significant over-valuation problem.
Bob Dugan, CMHC’s chief economist, said: “The most prevalent issue detected in 11 of the 15 centres covered by the HMA is overvaluation. Problematic overvaluation conditions in local housing markets could be resolved by moderation in house prices and/or improving economic conditions.”
The report also detailed overbuilding as an issue and said in a note Tuesday, that Canada’s 35 largest centres saw the average vacancy rate in privately initiated purpose-built rental apartments increase to 3.3% in October 2015 from 2.8% in October 2014.
Although this was partly due to an over supply of purpose-built rental apartment units, there was also lower net migration in regions most affected by low oil prices.
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Investors in the Vancouver property market are at risk of price correction in the near future, according to a report released by UBS at the end of last week. According to the UBS Global Real Estate Bubble Index, Vancouver has some of the most over-valued property prices in the world.