The magazine’s housing index also said that against the level of Canadian rents, housing prices come in 89 per cent overvalued.
The Economist’s findings sync with the claims of institutions such as the Bank of Canada, ratings agency Fitch and the International Monetary Fund. All three believe that the increase in house prices across Canada are not in line with the population’s incomes.
The housing index looked closely into 26 markets, where seven appeared to be overvalued by more than 25 per cent. The report blames the countries’ “ultra-loose” monetary policy, which brought some of the most historic interest rate dips around the world recently.
Belgium tops the list, with house prices in the country overvalued by 50 per cent relative to income. Other countries that the Economist found overvalued were Australia, France, Britain and Sweden.
David Madani of Capital Economics shared the same sentiment that low mortgage rates are driving the trend.
"I share the concern about overvaluation and particularly in the major cities, Vancouver and Toronto," he told CBC
, adding that “those prices in most other Canadian cities aren't nearly as high relative to income.”
The Economist magazine has surveyed housing costs around the globe and found that Canada’s housing prices are overvalued by 35 per cent when side by side with Canadian incomes.