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Vancouver

The housing market has been one of the brightest spots in the Canadian economy in recent years. Strong housing helped Canada weather the worst of the global financial crisis while the U.S. housing market south of the border collapsed.

The Economist magazine has been saying for years that Canadian property, more specifically residential property, is overvalued. But, its latest outlook offers the largest estimate yet: Houses in Canada, it says, are about 40 per cent too pricey, relative to “fair value,” or what people can afford.

The housing market has been one of the brightest spots in the Canadian economy in recent years. Strong housing helped Canada weather the worst of the global financial crisis while the U.S. housing market south of the border collapsed.

2015 was a rough year for the Canadian economy as the crash in oil prices weighed on the country’s western provinces and the Canadian dollar lost about 20% of its value against the US dollar.

The magazine’s latest global housing outlook offers an explanation for why Toronto and Vancouver, in particular, have seen runaway house price growth in recent years, while other Canadian markets have stagnated or even seen falling prices.

“Globalization has created a handful of metropolises that attract people, capital and ideas from all over the world, almost irrespective of how their national economy is doing,” The Economist writes. “House prices in such places, unsurprisingly, outpace the national average.”

Indeed, Chinese investors are getting hungrier for real estate in Canada. Bloomberg reported inquiries for Canadian homes on Juwai.com, a property search engine that lists real estate around the world for Chinese buyers, jumped 134 percent in the first quarter from a year earlier, quoting the Shanghai-based company.

In Canada, this is translating into an ever larger concentration of jobs, and people of home-buying age, in Toronto and Vancouver, even as the economy in many other parts of the country stagnates. And there are still a vast numbers of condominiums being built, particularly in Toronto and Vancouver.

The slowdown has been particularly sharp in Alberta, where much of Canada’s oil exports are produced, and which has been hardest hit by the collapse in the price of crude.

This has prompted a number of property sellers from Canada to look for alternative avenues to market their deals. There has been a significant spike in the number of real estate projects offered on BankerBay, most of them covering residential projects and industrial land. But worryingly some sellers who did not find buyers earlier returned asking lower prices for their property.

In 2013 Calgary was touted to be the “hottest” market in the nation, replaced by Toronto in 2014 and then in 2015 through today by Vancouver. In each instance, the home being described each month as Canada’s average home changed so much that someone new to Canada, seeing what the average looked like in 2013, would not even recognise it in 2016 as being the same.

These two cities now account for an enormous share of Canada’s economic growth.

This same pattern can be seen worldwide. As the average house price in Canada passed the half-million-dollar mark last month, British house prices topped the GBP 200,000 (C$370,000) mark for the first time. Thanks to London’s popularity among billionaire home buyers, prices in southern England are now twice as high as in northern England.

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