![\"\"](\"http:\/\/www.chrisbrownrealestate.ca\/blog\/wp-content\/uploads\/2017\/07\/houses-759x500.jpg\")
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The dramatic rise in Canadian house prices has been making headlines almost daily.<\/p>\n
And for good reason: prices in and around the country\u2019s hottest markets, Toronto (and until recently) Vancouver, have been posting double-digit annual gains. In May, prices in Toronto and Vancouver were up year-over-year 29% and 8.8% respectively.<\/p>\n
But Canada isn\u2019t the only country experiencing skyrocketing home prices.<\/p>\n
<\/p>\n The IMF\u2019s Global House Price Index, an average of real house prices across countries, is now almost back to its level before the financial crisis. Source: IMF<\/p>\n<\/div>\n But the two hottest housing markets are currently Iceland and Hong Kong, which posted annual price increases in Q1 of 17.8% and 14.4%, respectively, according to Knight Frank\u2019s Global House Price Index<\/a>.<\/p>\n Since 2015, prices in Hong Kong have risen a whopping 236%. If you think Toronto prices are bad, those desperate for a slice of the real estate market in Hong Kong are now paying upwards of US$500,000 for \u201cmicro apartments\u201d that measure no more than 161 square feet\u2014just barely large enough to contain a Tesla Model X, as reported by Bloomberg<\/a>.<\/p>\n Following Iceland and Hong Kong in the 55-market house price index is New Zealand in third spot and Canada, currently ranked as the world\u2019s fourth-hottest housing market.<\/p>\n Signs are also appearing that other European markets are starting to pick up steam as well. Research firm Global Property Guide reported that in 2016, 18 of the 23 European housing markets that it tracks posted price increases, with some of the strongest gains in Iceland, Ireland (+8%), Romania (+11%), Estonia (+7.4%), and Germany (+6.9%).<\/p>\n Not surprisingly, the largest price gains\u2014in Canada and around the world\u2014are predominantly restricted to the largest cities.<\/p>\n Over the past four years, prices are up 47% in Vancouver, 54% in London, UK, and 75% in Auckland, New Zealand.<\/p>\n International Monetary Fund (IMF) data<\/a> shows that in Canada, home prices at the national level are about 13% lower compared to the major cities. The difference is even more pronounced in the UK, U.S., New Zealand and particularly in China, where average national home prices are 55% cheaper than in the major cities.<\/p>\n The IMF tracks housing markets in 57 countries and reports its findings in its quarterly Global Housing Watch<\/a>. The economies are divided into three categories:<\/p>\n \u201cGloom\u201d \u2013 Those where house prices fell substantially during the financial crisis of 2008-09 and have yet to make a turnaround (Brazil, China, Russia, Spain);<\/p>\n \u201cBust and boom\u201d \u2013 Countries that have seen their prices rebound after falling sharply during the financial crisis (Germany, Ireland, Japan, New Zealand, UK, U.S.); and<\/p>\n \u201cBoom\u201d \u2013 Countries that saw only a modest drop in home prices through the financial crisis, followed by a quick rebound (Australia, Austria, Mexico, Sweden, Switzerland).<\/p>\n Unsurprisingly, Canada finds itself among the 22 \u201cboom\u201d economies, and has been on the IMF\u2019s radar as prices continue to soar higher.<\/p>\n In a previous report from June 2016, the IMF commented specifically on Canada\u2019s housing market and its level of risk at that time: \u201cMacroprudential policy has been broadly effective in alleviating financial stability risks and reducing tax payer exposure to mortgage finance. Additional macroprudential measures may be needed if housing market vulnerabilities intensify.\u201d<\/p>\n Fast-forward to October 2016 when the Department of Finance did just that and introduced its new mortgage rules<\/a>, which expanded mortgage stress testing requirements and imposed new restrictions on mortgage insurance.<\/p>\n With home prices in the Greater Toronto Area and Greater Vancouver Areas continuing to rise through the early part of the year (more so in Toronto following Vancouver\u2019s introduction of a 15% foreign buyer\u2019s tax), a new IMF report in May sounded yet another warning:<\/p>\n \u201c(Canada\u2019s) $1.5 trillion mortgage market has been important in sustaining private consumption but households are highly indebted and housing affordability, particularly in Vancouver and Toronto, has become a social issue with many first-time buyers priced out of the markets,\u201d read the IMF report<\/a>. \u201cCredit ratings of Canada\u2019s six largest banks were lowered recently, reflecting concern that high household debt and the rapid appreciation of house prices could weaken asset quality in the future.\u201d<\/p>\n And back in January the Organisation for Economic Co-operation and Development (OECD) had also commented on the growing risks associated with Canada\u2019s rising home prices.<\/p>\n Catherine Mann, the OECD\u2019s chief economist, said a \u201cnumber of countries,\u201d including Canada and Sweden, had \u201cvery high\u201d commercial and residential property prices that were \u201cnot consistent with a stable real estate market.\u201d<\/p>\n Despite the rapid increases in global house price, at least one top economist says that in itself isn\u2019t cause for automatic alarm about another global financial crisis.<\/p>\n \u201cThis is a time for vigilance, but not panic,\u201d Prakash Loungani, a member of International Monetary Fund\u2019s research department, wrote in a blog post<\/a>.<\/p>\n He and colleague Hites Ahir argue that the dynamics are different from the housing boom of the 2000s for two reasons:<\/p>\n![\"house](\"https:\/\/cdn.canadianmortgagetrends.com\/wp-content\/uploads\/2017\/06\/Global-house-price-index-Economis2t.png\")
Here\u2019s a look at some of the gains over the last four years around the world (data compiled by The Economist<\/a><\/em>):<\/p>\n\n
![\"home](\"https:\/\/cdn.canadianmortgagetrends.com\/wp-content\/uploads\/2017\/06\/Global-House-Price-Index-1.png\")
<\/p>\nIncreases Largely Isolated to Major Cities<\/strong><\/h2>\n
IMF\u2019s Eye on Canada<\/strong><\/h2>\n
Stepping Back from the Doom and Gloom<\/strong><\/h2>\n
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