New data from the world’s largest central bank serves a reminder of just how batsh*t crazy Canada’s real estate bubble is. Housing bubble experts from the US Federal Reserve Bank of Dallas (Dallas Fed) released its latest update of global home prices in Q3 2023. Most G7 countries moved in a similar fashion, rising with 2020 rate cuts and have shown recent moderation. However, zooming out reveals Canada’s real estate bubble is nothing like any other G7 country. It puts the peaks seen in US and Japanese bubbles to shame, predating its recent population boom narrative.
Concerns Over A Canadian Real Estate Correction Are Exaggerated
Canadian media may be focused on a home price correction but it’s barely a correction. A typical home saw prices peak in Q1 2022, after rising a whopping 59% from Q1 2020. Since peaking, prices shaved off 16.1% over the following year, before recovering some ground. In the latest quarter, prices remain 11.4% lower than peak. A substantial loss, but not really for anyone zooming out.
Canadian Real Estate Prices Went Bonkers Compared To G7 Peers
The Dallas Fed indexed home prices for G7 countries.
Source: US Federal Reserve Bank of Dallas; Better Dwelling.
Canada’s Real Estate Bubble Makes The US Bubble Look Tiny
The United States had a real estate bubble that shattered the global financial system. Since 2005, US home prices climbed a whopping 88.1% as of the latest quarter. That’s less than half of the 206.8% gain Canada saw, despite being the second largest country in the world, with a GDP equivalent to only Greater New York City.
No G7 Country Has Seen Anything Like Canada’s Real Estate Bubble
Canada’s gap when compared to other G7 countries is even more epic. After the US, home prices showed the most substantial growth since 2005 in the UK (+83.7% since 2005), Germany (+74.8%), and France (+53.7%). More modest gains have been observed in Japan (+5.0%) and Italy (+0.3%). The latter two countries saw their 90s home prices grow almost as fast as Canada today, before never returning to that indexed high.
Canada has managed to see its population rip higher as a result of recent policy decisions. The haphazard decisions appear to exist almost entirely to support its bubble narrative. Zooming out is an easy reminder that concerns about Canada’s state-backed, speculative credit bubble, existed before those decisions.
You guys have been running the same narrative for years.
Why don’t you run an article on the accuracy of your predictions for the last 10 years? Good thing this isn’t an investment newsletter.
You forgot to incorporate comparative population growth of the G7 countries into your analysis. It’s simple supply versus demand.
Great comment damon, How are the immigrants working big box store jobs in a country with crashing Per Capita Income fueling this bubble?
Yes, the “narrative” has been the same because the Canadian gov’t has done everything within it’s power to prop up this devastating bubble!!
In the US banks aren’t instructed to EXTEND amortizations or allow owners to not even cover the INTEREST and INCREASE THEIR DEBT LOAD WHILE MAKING PAYMENTS!
IT’S CALLED GOVERNMENT SANCTIONED INSANITY.
I lived in the US during the meltdown. Banks there are forced to take the LOSSES whereas Canadian “banks” are literally PREVENTED from taking losses and DAMAGING the fantasy that Canadian banks are “superior”. THEY ARE NOT. They are simply protected from facing the reality that many owners can no longer AFFORD their payments.
It’s not that simple lol affordability is just as important if not more. If nobody can afford the supply, and only people that bought homes at a certain point in time are able to leverage their house to buy another house, that’s a speculation bubble. Supply and demand is the most basic simple explanation that covers a sliver of the issue. Another big issue propping up speculation is that Canada is a home for criminal activity laundering money through real estate.
I hoped for their predictions. Narrative is simple now, with our housing dominant economy our middle class getting erased.
Want to post some evidence to your claim then?
Nothing to do with affordability then, eh Damon? That’s why despite housing scarcity prices are falling and inventory is rising? Supply is one aspect but sentiment is the driver here. Let’s revisit in 2026 when sentiment finally returns to normal – that housing is not an easy investment, and oh, yes, you can lose a ton of money.
Yeah that “demand” you refer to is not all qualified. Meaning everyone in the market for a RE transaction isn’t going to be able to afford or qualify for the kind of financing that these crazy prices require….. which is reflected in this article. Why is it a “narrative”? Isn’t what the author pointing out, supported by the data. i.e. ridiculous price growth, which in turn is supported by the govt/tax payers?
When you mention supply and demand, do you actually have data on how many mortgage applications were successful or NOT, from all private and public lenders? I would believe your take on that supply and demand theory IF you produce accompanying data….
Yes, supply and demand is a big part of it. That also leads to how did thay happen? Bad policies, NIMBY situations, land locking Canadians by way of the government holding all the lands from coast to coat at about 88% and in places like BC at a small amount of 94%.
This all in addition to majority of politicians being in the real estate game by way of home ownership to multi home ownership.
Many layers to this powder cake.
Ok, so here lies part of the problem….STOP all immigration right now….prices are crazy in the country and have been for almost 20 years now….let it pop, let it crash….the sooner the better…
House prices shouldn’t rise significantly, regardless of population growth, if supply and demand are in balance.
He’s been informing Canadians that they are being robbed in broad daylight by our predatory housing market, not predicting when our how it would end. Maybe it won’t. The state is a powerful agent.
“Good thing this isn’t an investment newsletter.”
Investment newsletters are accurate?
Who knew?
Everyone in the bubble do not see the bubble. The majority people of USA, Japan did not see it too and now we see the result. Sooner or later the pain will come to Canada based on the provided statistic.
It’s only painful for those who signed the dotted line the last five years. Specifically 2018+. Ones that bought from 2016 to 2017 refinanced during the low rate and are safe-ish since they had five more years to pay down their balances. The ones that took out HELOCs to buy additional properties will have to take a loss. The people who sold at the top of the bubble are laughing to retirement.
The bubble is already bursting, wait till June when unemployment ticks up another 1 percent when the job looses start due to high inflation, high interest rates…etc.
You think Canada is bad? Australia is worst. As long as there are people in the world that wants to live in Canada and Australia, housing prices will never go down.
https://www.reddit.com/r/canadahousing/comments/wcvocj/australia_vs_canada_housing_crisis/
Of course it’s excess demand over supply — but you’re completely missing the core problem here, which is unlimited crazy negative real interest rates in Canada for the last 15 years.
When anyone could borrow for zero cost, (backed by CMHC moral hazard, lax enforcement of tax laws, & acceptance of money laundering), everyone was incented to get in the game, thus rampant speculation in real estate. Everyone’s an ‘investor’, gotta buy multiple places, and when there’s a demand frenzy like this, no amount of supply can ever get ahead of it.
If we would just keep the damn interest rates at the present NORMAL levels for a few years (until the pivot narrative finally dies), we would rapidly see an end to the speculative frenzy and demand return to where it is balanced with current supply. The estimated 10% of properties held vacant in Canada today would easily meet the needs of immigration demand.
But keeping the interest rates here for much longer would of course mean a collapse in prices back to fundamentals, which will never be ‘allowed’ by the corrupt leaders of this country, so Team Pivot will sadly be proven correct, and no correction in demand will ever happen.
I for one am on Team Inflation, which is the only way interest rates won’t be quickly returned to zero – come on all you poor fools out there, borrow and buy and keep inflation high!
Although all information is absolutely right but this article is 3 years late .. explosion is coming soon and unfortunately nothing can be done .
Canada was easily the best country on earth in the 1960s &1970s a safe law abiding nation
Who the hellls bright idea was it to allow 3rd world immigration here ? The blacks have destroyed Toronto tbe good ,the indians destroyed Brampton and the Chinese cannot even see correctly causing road accidents and lets not even discuss how brutal.muslims are
This country stopped allowing white immigration when white people clearky are the only ones who know how to have a decent country ,am i incorrect on this last statment ??? Name a decent non white country outside of Japan ??? Come on lets see a great black country or Asian ??
They destroyed Canad yet to cowardly to admitt it well i was here and we were all white in Etobicoke outside a chinese student and odd negro ( tge negro acted white actually
The average Canadian is a home owner; ie: rents directly from the Bank (via mortgage) and from the Gov (via taxes). A convenient arrangement for Overlords.
The Gov transfers wealth from new and young Canadians by inflating the Bubble to Buy Votes.
The Housing Baloon is drifting out of the reach of the Average Canadian. Renting will soon become the norm. Who will the Gov buy votes from then?
Any policy is a subsidy for the bubble – rental assistance = tax payer subsidy for higher rents. They’re doing everything they can to push the cliff dive past the 2025 elections where the Libs will be replaced by a minority Con gov. Interesting times ahead. Japan can be happy to be silver medalists in the HB game once Canada pops. Eventually, you run out of fools money; just like tulips and imaginary tropical islands.
If it never pops it’s not a bubble, it’s just expensive
There is no housing bubble in Canada. Canada has a plummeting standard of living. The government of Canada is responsible. Any MP invested in housing should be considered a domestic terrorist.
In part it’s because Canadian cities and areas are less bat shit crazy than governments like the US and UK