Vancouver and Toronto Hit the Bottom of the UBS Bubble Index. Why That Isn't a Crash Call

UBS ranked Toronto and Vancouver the weakest housing markets in its 2026 global report, but the same report puts both cities at moderate bubble risk, lower than they've scored in years. Prices falling is what pulled the risk score down. Add a national construction shortfall CMHC now puts at 2.4 million homes, and the read on Vancouver is a market that's struggling, not one that's about to burst.

This week on the Coast to Coast Canadian Real Estate podcast, Mike (who works the Toronto side) and I went through the UBS Global Real Estate Bubble Index and a new CMHC housing supply report. The headline sounds like a crash call. Once you get into the report, it reads a lot more like the opposite.

What does the UBS bubble index measure?

UBS is a Swiss bank that covers housing markets around the world, and it publishes its own real estate bubble index just about every year. It's worth knowing how they define a bubble, because it isn't "prices are high." Their definition is a substantial and sustained mispricing of an asset, which can only be confirmed after it bursts. The warning signs they track are prices decoupling from incomes and rents, plus imbalances in the real economy like excessive lending and construction activity.

Toronto and Vancouver have checked the first box for years. Real estate here has been disconnected from local incomes for a long time. Construction activity is the other piece, and it's a big reason both cities moved down the list this year.

Why is Vancouver the weakest market but only moderate risk?

Two things are true in the report at the same time, and they sound like they contradict each other.

Toronto and Vancouver were the weakest-performing markets in the study. UBS has real, inflation-adjusted house prices down 10.7% year over year in Toronto and 9.7% in Vancouver, the two worst results on the list. Compare that with Seoul up 11%, Lisbon up 10.2% and Hong Kong up 8.7%.

And both cities now sit in the moderate risk band. For years Toronto and Vancouver lived in the yellow "elevated" territory, sometimes edging toward red. As we read it on the show, Toronto's score went from 0.8 last year to 0.63, and Vancouver's went from 0.76 to 0.62. Both are in the middle of the pack globally, with Miami and Los Angeles the only North American cities above us, and New York sitting a couple of spots below.

How can the worst-performing market be the less risky one? Because the index isn't measuring price, it's measuring the chance of a burst. When prices come down toward incomes, that gap closes, and the odds of a sudden collapse go down with it. The ugly year is the reason the risk score improved. Both Mike and I would say this year has been much worse than last year for our clients, and the report still scores us safer. I'd call that a good thing.

Vancouver sat in the elevated zone for a decade and didn't pop

The chart I'd want every doom-scroller to see is the history. On UBS's index, Vancouver was in the elevated range from 2007 until 2016. That's close to ten years of commentators calling for the bubble to burst, and it never did. Toronto was in a tough spot from about 2015 to 2022, and it didn't pop either. Both are on a downward trajectory on the index today.

Everyone has an opinion on this, but very few people look at the data. When you've got long stretches of evidence showing these cities sitting in elevated territory without bursting, and the current report says the risk is lower than it was, the "we haven't even started to fall" crowd has to account for that. Prices may stay soft for a while. Soft prices also help affordability, which is the actual problem in both cities.

What UBS wrote about each city

UBS's summary of Toronto is blunt. Between 2014 and 2022 it was the strongest market they analyzed, with real prices doubling on population growth, investor demand, cheap financing and strong construction. Since 2022 it's become the weakest. Higher rates, the foreign buyer ban and new supply triggered a sharp correction, prices are nearly 30% below their peak, and rents have fallen too.

On Vancouver, they write that prices have fallen nearly 10% since mid-2025, and inflation-adjusted prices are now 20% below the 2022 peak, despite interest rate cuts. They point to stringent stress tests, extra taxes and foreign buyer restrictions dampening demand, listings well above the long-term average, home sales at a 25-year low, and more rental supply forcing landlords to compete. Elevated inventory, slower growth, inflation concerns and the risk of further rate hikes keep the near-term outlook for prices weighed down.

For a report written in Switzerland, I'd say that's very, very accurate. It matches what we're seeing on the ground with buyers and sellers. If you want the local numbers behind it, our Kyle Mark Report breaks Vancouver down area by area every month.

Is Vancouver really the most expensive city in the world?

One chart in the report pushes back on something people say all the time. UBS measures how many years a skilled service worker needs to work to buy a 650 square foot apartment near the city centre. Among the major markets, Toronto is at the bottom of that list, the cheapest. Vancouver is a little higher, around six years on the chart. In Hong Kong it's about 15. Tokyo, Paris, London, Seoul, Singapore, Zurich, Sydney, New York and a long list of others all take longer than we do.

Mike raised fair questions about it: is the apartment a one-bedroom with parking or a studio, and are local wages weighed the same way everywhere? The report doesn't spell all of that out, so I wouldn't stretch the chart too far. What it does tell you is that "we're the most expensive place on earth" doesn't survive a global comparison. If you were born in Hong Kong or Tokyo, you'd be working a lot longer to buy that same apartment.

The foreign buyer question

The federal foreign buyer ban is up for review, and nobody has said yet what happens to it. From my own channel, I've been having regular calls with people in Dubai and Washington State who want to buy here and are waiting for January.

Opening it up wouldn't flood Vancouver, in my view, because there are two levers, not one. Ottawa would have to lift the ban, and BC still has a 20% foreign buyer tax on top. Ontario's non-resident speculation tax is 25%, so on an $800,000 home a foreign buyer is adding about $200,000 before closing costs. A lot of foreign buyers deal in US dollars, which helps them, but a 20% to 25% tax bill offsets most of the discount the market has given up.

The version I'm watching is what people call the Australian method. Under that model, a foreign buyer can purchase unsold brand-new inventory and be exempt from the restrictions. Metro Vancouver has just over 5,300 finished-but-unsold condos and townhomes by Zonda Urban's count, and the Vancouver Sun put that stock at about $4.4 billion on September 15, 2026. Developers would love to see that move. The federal government has been working on its review for nine or ten months without landing on an answer, so this is a wait-and-see.

Mike made a point I agree with. When foreign buyers were active, Ontario blamed them for everything. The ban came in, inventory hit record highs in some areas, and homes still aren't selling, because the underlying issue is affordability. People's incomes haven't kept up with prices, and removing one group of buyers didn't change that.

CMHC: Canada is building half of what it needs

The second report is the one I think paves the way for the next swing in this market. On September 15th, 2026, CMHC said Canada needs 469,000 homes a year but is on track to build just 231,000, which leaves a shortfall of 2.4 million homes. Their range is between 417,000 and 469,000 new units a year until 2036, across ownership and rental.

The deputy chief economist's warning was that new construction is slowing faster than demand, and the risk is that Canada underbuilds during the softer market and comes up short when demand returns. I think that's exactly where we're headed over the next four to eight years.

The breakdown is worse than the total. In both Toronto and Vancouver, rental starts are on a steep rise and condo starts are falling off. In Vancouver there are essentially no freehold starts on the chart at all, because there's no land. On Mike's side, he's looking at almost no condo starts in his market between 2027 and 2029.

Mike's question was the right one: are we building what people want? In the GTA he's watching new condo towers go up that buyers don't want, at around $400,000 for 500 square feet, with strata fees climbing on top. Builders are offering agents and buyers just about anything to get units sold and buildings to completion. Building more of the product nobody's buying doesn't fix a shortage.

Why the shortage matters for when this turns

A lot of people think the market is going to slide for another five to ten years. It can't do that when there's no new housing coming. Concrete towers and big townhouse developments take a minimum of two to five years from start to move-in, depending on zoning, and a lot of projects have been cancelled or never started. Immigration is down right now, but it won't stay down forever.

Both of these markets have a habit of swinging hard: super hot, then dead, then super hot again. Policy has followed the same pattern, with big sweeping changes like the foreign buyer ban, rent control and short-term rental rules rather than gradual adjustments. Builders pulling back today is setting up the next shortage.

What I'd do with this

• If you're buying in Vancouver: today's soft prices, a 25-year low in sales and listings above average put the leverage on your side. Get pre-approved and run your real numbers on the mortgage calculator, because the supply pipeline says this window doesn't stay open forever. Our buyer blueprint walks through how we approach it.
• If you're waiting for a crash: the UBS history says Vancouver spent a decade in elevated territory without bursting, and the risk score is lower today than it was a year ago.
• If you're an investor: watch what Ottawa does with the foreign buyer ban, and specifically whether an exemption for unsold new inventory shows up. That would move presale and new-build pricing first.

We covered the supply side of this in more depth in an earlier post on Vancouver's housing supply crash, and the full conversation with Mike is in the episode above.