The results of the Deutsche Bank study indicate that the country's market is overvalued by as much as 60 per cent in some major markets, which gives Canada a lofty position on an unfortunate list.
For their analysis, Deutsche Bank used a formula that provides averages of two metrics; home prices compared to rent and home prices compared to income. The overvaluation rates for these areas are 88 per cent and 32 per cent, respectively.
Various international news outlets have picked up on this information. Specifically, the Wall Street Journal has stated that investors give a wide berth to Toronto and Vancouver.
“On the other hand, if you can get around Japan’s restrictions on foreign investment, an apartment in Tokyo looks like a steal,” says the WSJ.
This news comes after a RE/MAX report released on Thursday, December 12, which noted the sustainability of the five-year high for the average home price, along with favourable prediction of an even stronger market.
But there are others who feel differently about the market's performance. Canada's housing market is still struggling with mortgage rule changes implemented in July 2012, and high household debt expected to challenge homeowners if and when interest rates increase.
"With a high level of employment and individual net worth tied to the value of the housing stock, a housing downturn could have serious consequences for the overall economy,” Fitch Ratings warned in a Fall report.
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