Vancouver real estate among most vulnerable in the world, Swiss bank says

While the threat of a downturn in Vancouver’s real estate has been spoken about for a while, a Swiss bank is suggesting this current dip might be a little more worrisome.

The Union Bank of Switzerland (UBS) says house prices in Vancouver have jumped 14 per cent alone this year, and have more than tripled in the past 25 years.

These increases, because of an urban housing shortage, strong population growth, and falling mortgage rates, according to the bank, are making the organization worried as a real potential of recession hits the country.

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UBS says the real estate picture is quickly changing — interest rates and financing costs have climbed in recent months to combat inflation, and several shocks have hit financial markets worldwide.

“Consequently, the willingness to pay for owner-occupied homes is likely to take a hit. In cities with strong population growth, such an adjustment could manifest in the form of a prolonged stagnation in nominal purchase prices and a price correction in real terms — i.e., adjusted for inflation. But as real estate markets rarely trend sideways, this is not the most likely outcome,” the bank said in a statement.

Where are the greatest bubble risks in 2022? UBS housing vulnerabilities. (UBS)

According to the bank, Vancouver ranks as the sixth most vulnerable market, with Toronto taking out first place. Canada’s largest city has a bubble risk of 2.24, while Vancouver’s risk is indexed at 1.7.

Amsterdam, Zurich, Munich, Frankfurt, Tel Aviv, Tokyo, and Hong Kong round out the markets that UBS suggests are the most vulnerable to a severe downturn.