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In Vancouver, the 2016 regulatory changes helped depress prices by 7 per cent compared with a year ago, but “sky-high valuations and overstretched affordability make the market vulnerable to even minor demand shifts,” UBS said.

“Due to increasing regional housing supply, a turnaround is unlikely for now, especially as real prices are still 75 per cent higher than a decade ago,” according to the report’s analysis of Vancouver. “However, downside risks are mitigated by still attractive financing conditions, as the Bank of Canada has lowered the qualifying mortgage rate for the first time since 2016.”

In considering Canada overall, UBS said “the housing frenzy seems to be over for now” and that further market weakening is likely as concerns about lower economic growth outweigh reduced mortgage rates.

Despite the housing bubble risks in Canada’s largest cities and lower interest rates globally, UBS said it sees a correction phase emerging worldwide due to burdens that buyers face in meeting mortgage payments, qualifying for bank loans in the first place and weathering the impact of economic uncertainty on demand growth.

“Despite the worldwide collapse in interest rates, the negative trend in home prices will probably continue,” UBS said.

By and large the cities of the eurozone had the greatest exposure to property price bubbles because of low interest rates and strong economic growth, with Paris joining the above-mentioned cities at risk of a price bubble, the report showed. Inflation is curbing affordability while an expected economic slowdown in Germany will test current prices, UBS said.