Canada

Canadian Real Estate Prices Grew Over 25x Faster Than U.S. Prices Since 2005

Canadian real estate prices are growing to comical levels, as bad policy stacks up. U.S Federal Reserve data shows real adjusted home prices increased at double the pace of the U.S in Q3 2020. As big as the gain is, it’s one of many times Canadian real estate prices have outperformed the U.S. home prices. In fact, it’s now at the point where Canadian prices have grown 25 times faster than U.S. home prices since 2005.

Canadian Real Estate Prices Were Up Over 8%

Canadian real estate prices made a massive jump last year, despite the pandemic. Real home prices increased 2.93% in Q3 2020, from the previous quarter. This brings annual gains 8.27% higher than the same month last year. Across the country, prices have doubled since 2005, and that’s after adjusting for inflation. One note worth taking away is, almost half of the gains occurred in the past 5 years. That’s a very rapid acceleration, even before considering the other half of the growth took twice as long.

U.S. Real Estate Prices Were Up Over 3%

U.S. real estate also made substantial gains over the past year, but it doesn’t look like much compared to Canada. Real prices increased 0.81% in Q3 2020, making them 3.45% higher than a year before. Across the country, prices are only 3.96% higher than they were in 2005, in real terms. In other words, prices have been moving largely with inflation over the past few decades. 

Canadian Real Estate Prices Have Grown 25x Faster Than U.S. Prices Since 2005

The consistent growth without correction over nearly two decades has disconnected the two. Canadian real estate prices didn’t just see double the growth over the past year. Since 2005, real estate prices have grown over 25.31 times faster than U.S. real estate prices. This is not a normal trend.

Canadian and U.S. Real Estate Prices

An inflation adjusted index of Canadian and U.S. real estate prices.

Source: US Federal Reserve, Better Dwelling.

Canadian real estate prices historically have moved in line with U.S. prices. From 2005 to 2020, real prices in Canada increased over 25 times faster than U.S. prices. Before 2006 though, they largely moved around the same pace, with exceptions in 1980 and 1990. At the time, these periods were “new paradigms,” but subsequently found to just be bubbles. The recent home price acceleration is so large though, many people find it hard to believe a correction is possible.

Most people think of Canada’s recent real estate price surge as a long-term trend. However, almost half of the price gains occurred over a period only a little longer than a single political term. It might seem like forever for some people, but it’s just a fifth of a mortgage amortization. Cheap credit and policy to preserve (and inflate) prices hasn’t lasted this long before. That doesn’t mean it won’t last, it just means there’s no historic precedent. It’s not clear if this establishes a new paradigm though. 

In the early 90s, the U.S. attracted young Canadian professionals looking for a better balance. Recently, Canada’s young people have been de-urbanizing due to high real estate prices. If both of those trends occur, will Canadians continue to pay premiums solely due to cheap credit?

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22 Comments

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  • MC 1 month ago

    Canada’s just a tiny island, so I can see why people pay the premiums.

  • Kate Wright 1 month ago

    BMO report out today showing US prices are 50% higher in Canada than the US after exchange. People are paying almost half a million dollars, to avoid paying $200 for insurance.

    • Ethan Wu 1 month ago

      Biden’s health care reform caps insurance at 7%, and it’s free for low income households. The low income threshold is also close to the median Canadian wage after conversion. Interesting times indeed.

    • Jimmy Snick 1 month ago

      lol $200? You do know that the average healthcare coat is $500-600usd/mo right? And that actual good healthcare plans run north of $1200/mo?

      • Homes or Healthcare 1 month ago

        You do know that the savings in taxes in most states will more than make up for the difference right?

      • Jonny 4 weeks ago

        Jimmy you obviously dont know what you are talking about, insurance is 250 per with a family of 5….typical

  • straw walker 1 month ago

    The only way most CDNs can generate wealth, is through the inflation in assets. The higher the inflation the greater chance to create wealth. Hence they buy real estate. Canada’s inflation is a lot higher than the government wants to announce, but it’s driving the price of housing through the roof.

    • SH 1 month ago

      Exactly. The government has structured the economy so that the only way to make real money is to speculate in real estate. Hard work – building a business, acquiring new skills – is severely punished in Canada through punitive income taxation. Much easier to flip houses since it takes little brains or effort and the government will backstop you.

  • Suresh 1 month ago

    As an immigrant myself, I know Canada’s real estate prices are driven by immigration. When Trump reduced immigration by half and created a visa backlog, many of us were forced to come here from the US. In the US there are many major cities with tons of jobs in every part of the country, with airports providing direct flights back to my home country. Hence, the property inflation wasn’t so bad because it was more spread out. In Canada, the only major economic center with IT jobs is Toronto. Trump’s stance on immigration has forced many of us to move here, but I’m hoping to move back once Biden comes into power and eases visa restrictions. I can’t be making the crappy money I’m making here and pay half my salary on rent.

    • Mike 4 weeks ago

      What your saying does make sense. You can fly internationally from small secondary airports in USA like Portland Oregon, which had 10 million passengers. Pearson had 32million the same year, but is considered out largest airport in our country. I wonder how many Canadians will now begin to move to USA. I already know 1 family to move – within a week of administration change.

  • Average Man 1 month ago

    I just feel like I don’t understand anything. How is this happening? Like, people, to their credit, try to explain it to my dumb ass and I KIND of get it, but I still can’t synthesize the information in a way that it makes sense to me on a core level.

    • SH 1 month ago

      Mass immigration – 3 times the level of the US per capita – is a big part of it. Ramped up significantly since 2015/16 since Trudeau spiked intake by 40% without putting in place proper new infrastructure to house and meaningfully employ them.

      A welcoming atmosphere to money launderers also encourages foreign criminals to park their money in Canadian homes knowing that the federal law enforcement will never go after them. Not the case in the US where they risk severe penalties.

      Btw, if you are looking into these issues and realize that something isn’t right, then you are far from dumb. Most people do not even get that far.

  • SH 1 month ago

    With Biden taking power, there is now ZERO incentive for any young, talented Canadian not to attempt to secure employment in the US. Easier said than done of course and most won’t succeed in finding a company to sponsor them, but there is no reason not to try at least, and Canada will lose its best and brightest as a result.

    Canada is quite literally the bottom of the barrel in the developed world when it comes to quality of life and cost of living for people under 40 (or even under 50).

    Why would anyone want to stay?

    • Jimmy Snick 1 month ago

      They stay because your claim is beyond wrong and Canada is consistently rated one of the best places to live with extremely high quality of life. I mean I’m bearish as much as anymore but claims like this are just wildly incorrect and false.

      • SH 1 month ago

        It isn’t “beyond wrong”.

        Canada is a low-wage / high cost of living country and offers very little opportunity to those with talent who work hard. Those silly surveys you cite were written by wealthy globalists intended to be read by other wealthy globalists. They do not reflect the facts on the ground. The average middle class person who isn’t born to wealthy parents is better off almost anywhere other than Canada.

        The US offers high wages. Australia too. Europe offers excellent work-life balance, with generous vacation time, high culture, and good labour protections.

        Canada? Bottom of the barrel. Low wages, high cost of living.

        • CJ 1 month ago

          Agreed. Imagine having a corporate office job making a middle-class income, having to save up $100,000 for a mortgage, and having more than half your salary go towards the mortgage. What quality of life is that?

        • Humphrey 1 month ago

          While I agree with a lot of what you say, I then must ask why then do immigrants keep coming to Canada as opposed to other areas in the developed world? They’re fixated on Canada as if we are the last bastion of prosperity on the Earth that’s left…

          • Immigrant Man 1 month ago

            Many come not realizing what they’re getting themselves into.

          • SH 1 month ago

            The premise of your question is false. Immigrants DO go to other countries. For those who apply to several countries and are only accepted by Canada, obviously they will then come to Canada. Is Canada anyone’s first choice? Maybe a few, mostly for family reunification reasons and for Canada’s lack of money laundering enforcement. Other than that, I think very few immigrants will prefer Canada over the US under Biden.

          • Angel 4 weeks ago

            I believe it has a lot to do with student visas.
            Canada basically stamps visas with minimum requirements. Even with regular immigration its pretty easy. People from developing nations just want to get out of there and Canada is the easiest way to do it.
            The govt gets them here they bring all their money here and then are basically stuck living in someone’s basement or rooming houses with no money or courage to go back because of social pressure.
            I agree Canada is now the bottom of the barrel for immigrants but it use to be great before the 2007 crisis.

  • Average Man 1 month ago

    The UK. The UK is worse. It’s probably the worst developed country. We are bottom five though for sure.

  • James 1 month ago

    Present policy makers in Canada have destroyed the working class. They have robbed the middle class by injecting free money and encouraged unemployment. The Government is boosting the real estate prices to only benefit asset class rich people, there is no real meaningful incentive or plan for the First Time Home Buyers. Where are the regulators? Is there any accountability?

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