Canadian Housing Overpriced – WAY overpriced
Posted by: admin in Canadian Real Estate on Oct , 2010
If the constant griping by renters wishing they could get into the home ownership game hadn’t tipped you off – in many parts of the country, people think that Canadian real estate is just too expensive. But are they right? Well, the complainers have won this round - venerated magazine The Economist has decided to agree with them.
According to a survey of global real estate markets, housing prices in Canada climbed 4.5% over prices in 2009, making the average Canadian house cost a whopping 23.9% more than it’s worth – at least according to the Economist. The magazine determined the “fair value” of a home by comparing the ratio of current house prices to current rents with the long term price to rent ratio – ie, the purchase price is divided by the rent it could earn per year. If it is significantly more expensive to purchase a home rather than rent one, housing may be over-valued, a situation the Economist kept finding in Canada.
Think that’s not scary enough? The Economist also indicated housing prices in Canada had increased 70% between 1997 and 2010. Clearly The Economist isn’t the only source finding housing overvalued in Canada – one of the graphics above shows the Google instant result when searching for Canadian real estate news – the only other suggestion? “Canadian Real Estate Bubble.”
While Canadian real estate prices were dramatically over valued, they weren’t the worst offenders. The dubious honor of most overvalued housing in the world went to Australia. According the magazine, anyone who buys in Australia is paying 63.2% more than it is actually worth. Countries like Hong Kong, Sweden and France also led – traditionally places that have high real estate prices.
