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 PricesThe 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 IncomeIndexed 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.
Like this post? Like us on Facebook for the next one in your feed.