Toronto and Vancouver have been named the two weakest housing markets among the cities tracked in UBS Group AG’s global real estate bubble index, released Tuesday, marking a sharp reversal from years when the two Canadian cities led the pack. Despite the slide, the Swiss bank still rates both cities as facing only “moderate” risk of a housing bubble.
Inflation-adjusted home prices in both markets fell by about 10 per cent year over year, a steep contrast with the broader group of global cities UBS analyzed, where prices edged up roughly 0.5 per cent on average. Seoul topped this year’s index with an 11 per cent annual price gain, followed by Lisbon at 10 per cent and Madrid at eight per cent. UBS said it selects cities based on their importance to global financial markets and residential real estate investment.
From Top of the Pack to the Bottom
The shift is notable given Toronto’s history in the index. Between 2014 and 2022, Toronto had ranked as the strongest market among the cities UBS tracks, before falling to the bottom in 2026 as prices dropped 30 per cent from their peak. Vancouver has seen a similar, if less dramatic, decline, with prices down 20 per cent since their 2022 high.
Even with these declines, both cities remain costly by global standards, according to Aled ab Iorwerth, deputy chief economist at the Canada Mortgage and Housing Corporation. The benchmark home price in the Greater Toronto Area has held near $930,000 since March, per the Toronto Regional Real Estate Board, while Metro Vancouver’s benchmark price stood at about $1.08 million in August, according to Greater Vancouver Realtors.
UBS’s price-to-income measure, which calculates how many years of average income are needed to buy a 650-square-foot apartment, placed Toronto at the very bottom of the list and Vancouver near the lower end, at roughly five years. Both cities remain more affordable by that measure than Paris, where the equivalent purchase requires more than a decade of average income.
Ab Iorwerth said Toronto and Vancouver saw sustained price growth from 2006 onward, fuelled by economic and population growth as well as the cities’ pull on high-tech industries, which made them increasingly unaffordable — a pattern also seen in cities such as Sydney, San Francisco and Boston. Prices in the two Canadian markets began to flatten after the pandemic-era buying surge, he said, as affordability pressures pushed some buyers toward other cities, including Ottawa and Montreal, where prices subsequently rose.
Condo Sector Under Pressure
Ab Iorwerth pointed to broader economic uncertainty over the past year as a factor discouraging large purchases like homes, along with what he described as an outsized downturn in Toronto’s condo sector. A May report from Toronto-Dominion Economics found GTA resale benchmark condo prices fell 10 per cent year over year in the first quarter of 2026. TD does not expect prices to start climbing again until 2028, by which point it projects a cumulative decline of 25 to 30 per cent from the market’s early 2022 peak.
UBS’s bubble index also assesses the odds of a significant price correction, and it placed both Toronto and Vancouver at moderate risk, down from elevated risk status in 2024. Zurich and Tokyo were the only cities rated at high bubble risk globally. Jonathan Woloshin, UBS’s U.S. real estate strategist, said that classification does not signal an imminent crash comparable to the U.S. housing collapse of 2008.
“Vancouver and Toronto had been overheated, especially relative to other markets, (and) things have pulled back,” Woloshin said, adding that increased construction in Toronto has helped ease some of the market’s earlier “speculative froth” and contributed to the inflation-adjusted price declines now showing up in the data.
Supply Concerns Linger
Looking ahead, ab Iorwerth said he does not expect sharp further price declines in Toronto or Vancouver, though outcomes could shift depending on international developments such as trade or energy shocks. He also said he does not anticipate an elevated bubble risk in the near term, but flagged Toronto’s falling housing supply as a potential vulnerability.
CMHC’s fall housing supply report found Toronto would need to increase annual housing starts by at least 50 per cent over the next decade to restore affordability to pre-pandemic levels. Population-adjusted housing starts in the first half of 2026 were at their lowest level since 1996, excluding 2025. “If the economy were to recover strongly in (the next) three years, I’m a bit concerned that the housing supply will not be there,” ab Iorwerth said. “And so, we could go into a bubble condition in a few years if we don’t carry on building housing.”
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