Is Vancouver overvalued or not?

The question as to whether the Vancouver housing market is overvalued is still up for debate apparently, with an international report contradicting Canada Mortgage and Housing Corporation’s assertion that the city’s market is at low risk of a correction.

Vancouver’s “significantly overvalued” housing market is among the most bubbly in the world, according to the UBS Global Real Estate Bubble Index, which launched this week. The report puts Vancouver at No. 4 behind London and Hong Kong, and just a shade behind Sydney.

“Bubble risk is most distinct in London and Hong Kong,” said the study, which looked at price-to-income and price-to-rent ratios and a handful of other measures. “Deviations from the long-term norm point to significantly overvalued housing markets in Sydney, Vancouver, San Francisco and Amsterdam.”

According to this study, Vancouver prices in 2015 were up by 25 per cent since 2006, suggesting that valuations “look very stretched,” although the “dynamic has slowed significantly of late.”
The CMHC’s Housing Market Assessment (HMA) offered a slightly more optimistic view for property investors.

“The HMA points to weak evidence of overall problematic conditions in Vancouver, though we are now detecting moderate evidence of overvaluation,” CMHC said in its report. “However, overheating, acceleration in house prices and overbuilding are not a concern in this market.”

USB pointed to strong Asian demand as the reason for the rise in Vancouver prices, while adding that rents and incomes registered only single-digit growth rates in the same period. “The recent plunge in commodity prices and unpredictable foreign demand cloud the current outlook,” stated the report.

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