Canadian real estate prices went from the fastest growing to the fastest falling in just a few rate hikes. The US Federal Reserve Bank of Dallas (Dallas Fed) Q2 2022 index of real home prices shows Canada made the biggest drop in the G7. Still, Canada retained gains making it the largest real estate bubble of the group. Leading the way higher was the recently declared real estate bubble in the United States.
Canada Is Leading The Way Lower, America Leading Higher
Home prices are predictably falling the fastest in economies most sensitive to rising interest rates. Canada (-4.3%) made the biggest drop across the G7 in Q2 2022. It was followed by Japan (-2.7%), France (-0.7%), UK (-0.6%), and Italy (-0.4%). Just two countries, the US (+4.7%) and Germany (+0.2%), increased against a backdrop of rising interest rates.
All But One G7 Country Has Seen Home Prices Grow Since Last Year
Nearly all countries have retained annual growth, with the US (+13.4%) making the largest gains since last year. Canada (+12.4%) slipped into second, followed by Germany (+3.7%), Japan (+3.4%), UK (+2.7%), and France (+2.0%). Italy (-0.7%) is the only exception when it comes to annual growth, with a minor decline for its real home prices.
Canadian Home Prices Grew Nearly 2x The Rate of The Next G7
Canada might be leading the way lower for residential real estate prices, but it inflated the most. Since 2020, Canada (+42.8 %) has seen real home prices rise nearly double the rate of the US (+24.0 %), the second closest country. Germany (+15.7 %), the UK (+10.6 %), France (+8.4 %), and Japan (+7.2 %) demonstrated much more modest gains. Italy (-0.4 %) was once again the only loser by this measure.
G7 Real Home Price Change Since 1975
The inflation adjusted change of residential real estate prices since 1975 in G7 advanced economies.
Source: US Federal Reserve.
Canadian real estate prices are the fastest falling home prices across the G7, but were also the fastest growing. Unlike other G7 countries, Canadian households have yet to see a major correction in the past 30 years. This not only makes them the most highly indebted of the group, but also the most vulnerable to rising interest rates and inflation.
NOrmal people can not afford $1.4 million bungalows.
They can barely afford $600,000 bungalows. So it seemed obvious to many that prices were and are out of whack.
As usual, I can only blame the consumer. Use your common sense, and FOMO is not sensible. A wise man once said that to miss out is bliss and peace. But who these days wants peace?
Hi,
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US gets frothier, HA! the news is months behind, all you have to do is check out zillow or one of the others to see how many listings have sprung up. In some areas all the failed flips are up for rent, there are hundreds of homes for rent in some developments, it’s going to be waaaayyyy worse than 2008
this implies a fundamental lack of understanding of what happened during 2008. Back then there was no ability to borrow money at almost any interest rate, which isn’t the case in the current environment.
Certainly, the Canadian Real Estate Associations blind eye to real estate agents listing properties in such a way that they set up a bidding war on listed properties deliberately, has a lot to do with the unrealistic sale prices across Canada today. I would assume that our government turned a blind eye to this scamming on the part of the real estate industry, leaving the average Canadian unable to purchase a property at sky high and unrealistic prices. And now with the government hiking interest rates so quickly to “curb inflation”, those that did buy are going to be hard pressed to hang on to their homes, and those that couldn’t buy earlier, won’t be able to buy first, because the properties are still too high in price, regardless of the softening market (so far), and further, they can’t meet mortgage company qualifications …. still. It seems to me that the over inflation of the market was deliberate on the part of the Real Estate Industry and Government. For example, CREA wants a policy change to that will force real estate agents to list most properties on the MLS rather than marketing their listing privately. CREA thinks this is in the best interests for the consumers. Where was CREA properties were being marketed in such a way a bidding war was set up driving housing prices out of reach for the average Canadian? And which has in part, at the least, led to the state of the Canadian real estate market today. “The Covid real estate market” which saw the scamming of Canadian real estate purchasers especially, seems to me to have a huge influence on the state of our economy overall right now. And it was a hoax perpetrated on the Canadian people by the Real Estate Association in cahoots with government that should have halted such behaviors. This was not free market behavior, it was not int he best interests of consumers, it was a hundred percent scam on all Canadians whether they bought a home or not. And today they are paying the price regardless.
Lies spread by conservatives. We need to increase immigration to 2 million people a year and that will support our economy. That will fix the housing problem because we don’t have enough homes.
The factors are stacking up now…… the weight is too heavy. 2023 is not looking good. Watch the news…..