Of 34 country ranked and rated by the Organization for Economic Co-operation and Development, which focused this report on economic powerhouses, Canada came in just after Belgium and Norway as a country marred by home prices out of whack with both average salaries and rental prices.
In shorthand, it means Canada has the third most overvalued real estate in the developed world. That’s on two fronts.
Given rents in Canada, the OECD pegs home prices as 60 per cent over their actual values, suggesting the cost of buying far outweighs that of renting.
In terms of salaries, the OECD argues that home prices are 30 per cent higher than the average paycheque’s ability to afford.
The report is likely to heighten concerns that Canadian homeownership would be compromised with any significant shift in interest rates. It also suggests that price corrections in some markets may be inevitable in the next couple years.
Those fears are virtually none existent as far as many other developed nations are concerned, according to the report.
It points to Japan, Germany, South Korea, Ireland and Portugal as markets where home values are the least inflated, although at least two of those market are still battling back from massive price corrections following the housing bubble of the 2007.
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