Alexa

REAL ESTATE

In Canada the current house price-to-rent ratio is higher than the US

In Canada the current house price-to-rent ratio is higher than the US
The Siliconreview
03 June, 2021

Canada's current real estate scenario is now somewhat similar to 2006, and the US must take this as an alarm. The present house price-to-rent ratio is showing that Canadian real estate is significantly overvalued. Generally, the house price-to-rent ratio is calculated to compare the cost of a house with renting a similar place. Rent is often coupled with income growth because it serves as a fundamental indicator, and it is quite stable too. This is not the case with house prices because it indicates credit accessibility.

When there is a scenario in which the house prices are increasing rapidly when compared to the rent, it means that the valuation of the properties is being stretched. Experts are predicting that the current overvaluation scenario is similar is to the 2006 US housing bubble. When the ratio is witnessing a fall, it means that the house prices are becoming fair and it is being undervalued. In a market that is healthy, both the prices will tend to move together horizontally. 2020 was one of the biggest years for the US housing market because it grew slower than one percent when compared to 2019. Even though there's a talk that the US is expensive when compared to Canada, housing is more affordable in the US.