Canada

Canada’s Real Estate Market Is The Fastest Growing In The G7, And The Most Inflated

Canadian real estate prices aren’t just fast growing by local standards. They’re growing fast by any standard. US Federal Reserve data shows real home prices advanced in most of the G7 in Q3 2020. Canada topped the list of advanced countries for annual price gains. This isn’t a new trend though. Canadian real estate prices have become such a focus of speculation, they’ve grown almost 3x faster than the second fastest growing G7 country.

Canadian Prices Are The Fastest Growing In The G7

Canadian real estate prices are still growing at a breakneck speed. Real prices increased 2.93% in Q3 2020, bringing them 8.27% higher than the same quarter a year before. The annual growth is now the biggest of the G7 countries. Since the beginning of the Great Recession, Canadian real estate prices have outperformed every G7 market… by a wide margin.

G7 Real Estate Prices Change

The inflation adjusted change in G7 real estate prices in Q3 2020, compared to a year before.
Source: US Federal Reserve, Better Dwelling.

Canadian Prices Grew 45% Faster Than Germany, The Second Best Performing Country

Germany’s real estate prices are the best performing in the past quarter, and just behind Canada annually. Germany’s real home prices increased 3.09% in Q3 2020, bringing real prices 6.99% higher than a year before. Despite being the second best performing country in the group, prices are only 38.5% higher than they were in 2005. That means Canadian prices grew 45.2% faster over that period – leading to a massive gap. 

G7 Real Estate Price Index

An inflation adjusted index of G7 real estate prices.
Source: US Federal Reserve, Better Dwelling.

Japanese Real Estate Is The Only Market To Fall

Japan, the negative rate marvel most countries are using as a successful model, is the only country that’s negative. Real home prices in the country were down a fairly flat 0.01% in Q3, bringing prices 1.15% lower than a year before. Real home prices in the country are 11.4% lower than they were in 2005, meaning home prices failed to even keep inline with inflation. 

Italy Was The Only Other Market To Have A Slow Q3

Italy made the biggest quarterly drop in the most recent numbers, but still managed to squeeze out a gain. Real prices fell 2.14% in Q3 2020, bringing them 2.17% higher than last year. Since 2005, real home prices are up 30.1% – which is huge, it just doesn’t seem big against Canada’s movement.  

Cheap money is a global trend, inflating almost every real estate market. Canada’s economy is unusually dependent on real estate though. The country’s residential investment is nearly double that of the US currently. It’s also almost 50% higher than the US was during their housing bubble. Somehow, the country’s central bank thinks growing at 25x the rate of US real estate is normal.

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16 Comments

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  • Jamie 9 months ago

    There’s a reason Canada brokers one way immigration deals. haha.

  • Kate Wright 9 months ago

    To think, Germany had a third of the growth, and they’re nationalizing 200,000 apartments so it’s not a drag on economic growth.

    https://www.dw.com/en/berlin-spends-nearly-1-billion-buying-back-apartments/a-50617775

  • Canadian 9 months ago

    I am tired seeing this insanity around. It is like dark time finally come and there is not future. Possibly, it is better not to follow these news be poor and relax.

  • SH 9 months ago

    An outrageous and deliberate act of financial oppression on Canada’s working and middle class.

    If Canada refuses to be loyal to its citizens – putting their interests BEHIND those of foreign RE speculators – then nobody should be surprised to see a growing number of Canadians turn their backs on the country in the coming years.

    • Action needed 9 months ago

      Agreed. The government should step in and do something before royally screwing over ‘younger’ generations (as in 40 and under). This is a horrible time for anyone wanting to purchase a home of their own. How can you start a family when all your income goes into costs of living? Heck, how can you save for a down payment when rent is so high? (Admittedly this has dropped in some areas, but will likely rise once the pandemic is over).

      It’s no wonder at all why the birth rate has dropped. Immigration is a short term fix at a cost for the long term (as this hasn’t helped the underlying issue). Fun times ahead…

    • Doomcouver 9 months ago

      Agreed. It feels like the only two possible outcomes are messy housing collapse in the next few years, or widespread punitive wealth-taxes when boomers exit politics and are replaced by their disenfranchised children in a decade or two. In the meantime, Canadians are heavily incentivized to flee major cities for cheaper remote locales.

  • fred 9 months ago

    Good job Bank of Canada…!!!!!!
    Screwing average people in Canada

    • Doomcouver 9 months ago

      I don’t really blame the BoC for what’s happened to land prices. They have a very small margin to manipulate rates in. We’re at the mercy of the global race to the bottom in terms of rates. If the BoC raised them significantly the dollar deflation would destroy our economy almost immediately.

      The real people to blame are all levels of the Canadian government that failed to bring in meaningful legislation to slow the growth of real estate prices. They just threw their hands up got fat off massively escalating property taxes. It’s going to end badly though, and every Canadian will be permanently worse-off due to their inaction.

  • Doomcouver 9 months ago

    The truly depressing part is Canada’s housing market didn’t have to end up like this. Adequate restrictions on foreign ownership, and anti land-hoarding legislation would have preserved Canada as a reasonably priced place to live. Sadly politicians have a clear conflict of interest in trying to keep all forms of property tax as massive as possible, and sky-high real estate prices is the easiest way to do that. Maybe after the whole thing falls in on us and collapses the tax base they’ll get their heads out of the sand and make some meaningful changes to ensure it doesn’t happen again. Though the massive Toronto condo crash in the ’80s, and the housing bust in the USA in 2008 didn’t seem to teach our government anything, so sadly I’m sure nothing will be learned this time around either.

    • SH 9 months ago

      The conflict of interest also has to do with the fact that 99% of politicians are homeowners and a very large percentage also own rental properties. If I recall correctly, the finance minister in Cristy Clark’s corrupt government had a stake in something like 8 properties in BC?

    • Sam 9 months ago

      Agreed, it didn’t have to be this way. Good leadership, good legislation from the start could have steered the supply and demand sides toward a balanced, slow-growth, affordable and successful market place. Think of all the housing issues across multiple spectrums of Canadian communities this would have alleviated.

      I think the problem is basic human nature. For that reason I don’t blame the boomers, or the government. We all are allowing this to happen. Kind of like the Netflix movie “Platform” and millenials and younger are on levels lower than 200.

  • fred 9 months ago

    Canada’s Real Estate Market Is The Fastest Growing In The G7, And The Most Inflated
    Which sentence is correct
    1- Because Canada is a tiny island and it dose not have enough land
    2- Because of policy of corrupt government and central bank.

    • Doomcouver 9 months ago

      I’m going to go with #2, since Canada is the 2nd largest country by landmass in the entire world. haha

  • Bubble Trouble 9 months ago

    Airbnb, political corruption, artificially low interest rates, money laundering, slick marketing campaigns dressed up as economic fact, delivered to the masses by a pliant media, have contributed to the formation of the massive housing bubble.
    Now the good news for those who wouldn’t be fooled:
    It is a bubble, and as such, it will end like all bubbles

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