Canadian home prices grew much faster than American home prices, but did incomes? In Canada, home prices have grown at a rate more than double that seen in the United States. However, disposable incomes over the same period grew at basically the same rate. Let’s take a dive into how shelter costs evolved in the two countries over the past few decades.
Canadian Home Prices Grew 2x Faster Than In The U.S.
Canadian home prices have been on a tear over the past few years, and it doesn’t matter where it’s compared to. From 1975 to 2020, home prices across Canada increased 1,467.3%. More recently, prices have increased 278.0% over the past 20 years. Remember, this isn’t a high-growth real estate market like Toronto or Vancouver. It’s all of Canada.
U.S. home prices also made a decent climb. From 1975 to 2020, home prices increased 692.9%. Over the past 20 years, they increased a more modest 106.0%. If you read this paragraph without knowing how Canada did, it would sound pretty good. In contrast, the gains sound a little tame. They aren’t.
Canadian and U.S. Home Prices
The indexed quarterly value of home prices from Q1 1975 to Q4 2020. Source: OECD; Better Dwelling.As you can see above, Canadian real estate significantly outperformed American real estate. From 1975 to 2020, home prices in Canada grew 111.8% faster than in the US. More recently, from 2000 to 2020, the growth was 162.2% higher in Canada than in America. Surely this is related to income growth, right? Not even close.
Canadian Income Grew Similar To U.S. Incomes
Canadian disposable incomes don’t even come close to matching home price growth. From 1975 to 2020, disposable income increased 771.0%. Over the most recent 20 years of data, it increased 105.7%. In other words, incomes are a little more than double over the past two decades. Not the kind of growth seen in home prices.
U.S. disposable incomes must have totally sucked in that case, right? From 1975 to 2020, American disposable income increased 765.9% — just 5 points lower than Canada. Over the most recent 20 years of data, the increase was 93.0% for disposable income. It almost doubled over the past two decades.
Canadian and U.S. Disposable Income
Indexed quarterly dispoable income from Q1 1975 to Q4 2020. Source: OECD; Better Dwelling.In the chart above, you can see the gap in disposable income isn’t nearly as big as it is for home prices. From 1975 to 2020, the growth rate for Canadian disposable income is only 0.7% higher than America’s rate. Over the 20 most recent years, Canada’s growth rate is only 13.7% larger. A little bigger than the U.S., but not to the extent of home prices.
Both countries expect the next generation to pay more for real estate. Both countries saw a similar amount of disposable income growth. One expects the next generation of home buyers to devote much more of their income to supporting the wealth of previous generations.
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This is why Boomers and Millennials have such different attitudes towards Canada. Older home owners think the country just rains wealth on them.
They don’t realize Millennials are the first generation to have less than the previous generation, and are required to spend more to print the wealth. Then they would ned the same predatory attitude towards the next generations if they want the same.
I’m sure it was the same feeling in the early 1600’s for tulip owners vs. non-tulip owners. Boomers would be wise to lock in their paper gains before this unsustainable mess of a housing market comes crashing down. Sadly it seems like a lot of them are just taking this opportunity to extract equity and buy more real estate.
Moved to Florida, loving it. Best decision I’ve ever made. The fear-mongering that Canadians is outrageous. My effective tax rate is 22% vs 40% in BC. Health insurance is a lot cheaper than 18% of income, and housing is less than half the price.
Most importantly, people here actually talk about doing things. People are starting companies, investing, and spending in the local economy.
Big difference compared to Vancouver, where everyone judges each other for spending at a restaurant because every last dime should be going into a condo that doesn’t even outperform the stock market.
Sad but true. Middle class poverty is becoming a pandemic of its own in Canada. Even highly educated, highly skilled professionals are barely earning enough to offset the exorbitant real estate costs.
Speaking from experience in the Corporate Finance/Accounting world, salaries are definitely higher in the US. It’s common for workers even in small to medium sized U.S. cities to earn more than workers in big Canadian cities.
Only difference these days between the office class and blue collar trades in the white shirts don’t change in and out of soiled Cintas uniforms and won’t have arthritis by 40.
Plus if this housing market actually does burst, being decent at excel or reading P & L won’t be as valuable as knowing how to work with your hands.
It’s the dumb bankers making moves just because they think property prices could drop. Why wouldn’t they wait to see a bit of a decline before acting. Or better yet just let the markets normalize like they should naturally. These idiots are over shooting on everything including giving people more money than they lost during the pandemic. We need more intelligent people running the BOC. This is very clear! Who the F$CK really wants yo pay 700k for a $hit townhouse in Oshawa, are you kidding me, I see idiots paying that much when they were 489k a little over a year ago.
Younger generation is dependent on older generation for basic need – housing. I don’t know what part of it older home owners like – buying a home was the best decision they made in life?
This pretty much sums up what I want to explain to every dim witted boomer relative who does not seem to understand how we can be in our thirties, make good money, but still can not afford a home. They could buy home with factory jobs
Half of boomers with an IQ less than the speed limit sitting in big empty homes telling Ms and Zoomers to do defy physics and pull themselves up by their own bootstraps. Many on fixed income clipping coupons for cans of soup because they’re going to make sure they die in their own home, if it means a bed and bathtub in the living room with a relative living up or downstairs giving them sponge baths.
I’m born and raised in the GTA. The government’s handling of the virus resultant in unprecedented modern era tyranny based on spurious if not completely fabricated science combined with crypto style price appreciation has resolved me to plan accordingly. It will not include buying a 600sqft condo to get on the “ladder.”
Many of the Boomers you speak of where new immigrants to Canada who took great risk and had zero support or fall back when they came to Canada. It sucks that you can’t into the property ladder but there are opportunities elsewhere if you are will to take on some risk like those immigrant boomers did. There are lots cities in the U.S. where cost of homes are much more affordable. Perhaps take the immigration risk that the boomer generation did and immigrate out?
What’s the point though. They are very different countries. America is a sprawling mega enterprise with vast stretched of arable land and places to live. Canada is a very small, limited economy country, that has a strong socialist bent. Why would I compare the two… And why would I compare there housing prices especially.