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UBS house ‘bubble index’ warns Vancouver among world’s frothiest

'Very stretched'

Vancouver’s “significantly overvalued” housing market is among the most bubbly in the world, a new report suggests.

The UBS Global Real Estate Bubble Index, which launched this week, puts Vancouver at No. 4 behind London and Hong Kong, and just a shade behind Sydney.

In fact, Vancouver and Sydney are so close together that they’re virtually tied for the third spot in a ranking where No. 1 is not where you want to be.

The UBS report backs up other warnings about Vancouver, which, along with Toronto, has been the focus in Canada when it comes to the word “frothy.”

“Bubble risk is most distinct in London and Hong Kong,” said the study, which looked at price-to-income and price-to-rent ratios and a handful of other measures.”

“Deviations from the long-term norm point to significantly overvalued housing markets in Sydney, Vancouver, San Francisco and Amsterdam.”

According to this study, Vancouver prices in 2015 were up by 25 per cent since 2006, suggesting that valuations “look very stretched,” although the “dynamic has slowed significantly of late.”

For the record, as The Globe and Mail’s Tamsin McMahon reports, Canada Mortgage and Housing Corp. said yesterday that Vancouver is at low risk of a correction.

Word of the day

Bubble
“A substantial and sustained mispricing of an asset,” according to UBS. (Not to be confused with the sound of the day: Pop.)

Valeant cuts ties with Philidor

Valeant Pharmaceuticals International, the Canadian company in the eye of a raging storm, is “severing all ties” with Philidor Rx Services.

Valeant also said today that Philidor, a distribution pharmacy that is playing a role in the controversy, plans to close up shop “as soon as possible.”

Valeant CEO Michael Pearson said in a statement that “operating honestly and ethically is our first priority, and you have my absolute commitment that we will make it right.”

As The Globe and Mail’s Omar El Akkad reports, some major American drug-benefit companies cut their ties with Philidor yesterday.

How they dreamed up Ontario's Hydro One sale?

Source: Giphy.com

GDP growth slows

Canada’s economy slowed down in August after bigger gains in June and July, but of note is what drove the latest reading.

Gross domestic product rose by 0.1 per cent in August, The Globe and Mail’s David Parkinson reports, having expanded by 0.4 per cent June and 0.3 per cent in July.

Helping August along were some interesting sectors, though, notably manufacturing and the oil industry, Statistics Canada said today.

Quebec's flexibility

The politics of it aside, some observers believe the Quebec government has the flexibility to pump $1-billion (U.S.) into Bombardier’s troubled C Series program.

“While technically a non-budgetary item, the $1-billion (U.S.) investment nonetheless amounts to a cash requirement, given the two $500-million payments that are set to be made in the first quarter of 2016-17,” Warren Lovely, National Bank’s head of public sector research and strategy, said in a research note.

“Note, however, that the province’s other investments/infrastructure spend is currently running below plan, creating offsetting room to accommodate the C Series investment,” he added.

“As a result, the investment need not result in a meaningful adjustment to the province’s projected borrowing requirements.”

Stat of the day

2.6%
Average increase in 2016 pay for non-unionized employees, as projected by the Conference Board of Canada.

Death and taxes: Governments target smokers, rich

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