The Bank of Canada Only Sees 2 Real Estate Bubbles and Vancouver Isn’t One of Them

Canadian cities rank as some of the largest real estate bubbles globally, but Canada doesn’t see it that way. The Bank of Canada (BoC) House Price Exuberance Index Indicator (HPEI) ranks just two cities as exuberant in Q3 2021. Neither of those cities is Toronto or Vancouver, despite both ranking amongst the biggest real estate bubbles in the world. 

House Price Exuberance Indicator (HPEI)

The HPEI is the BoC’s city-level assessment of real estate market exuberance. It looks for explosive dynamics in home price growth and ranks it. An explosive dynamic is when home prices grow over what fundamentals support. Fundamentals include incomes, mortgage rates, and population growth. They don’t include your real estate agent/personal trainer’s belief that prices rise forever.

Reading the index is pretty straightforward. If the city has an HPEI over 1.0, the market is declared exuberant and turns red on their color-coded chart. When it’s green, the market is considered healthy with no signs of exuberance. It’s similar to the Federal Reserve Exuberance Index. The big difference are the results, but let’s come back to that in a few. 

Hamilton and Montreal Real Estate Are The Only Bubbles In Canada

With home prices rising up to 60%, all of this commotion doesn’t strike the BoC as explosive growth. That’s right. The HPEI only shows two housing bubbles across Canada — Hamilton, and Montreal. Toronto and Ottawa are running hot, but the falling index values show they’re cooling down. 

Hamilton real estate is catching global attention for its frothy valuations. The city last saw a healthy market in 2015, spending 15 of the past 25 quarters as an exuberant market. 

House Price Exuberance Indicator (HPEI)

Source: Bank of Canada. 

Montreal real estate has seen colossal price growth since 2017 but only just got an exuberant label. The market printed three consecutive quarters of exuberance. Each one of them scored higher ranks, showing that dynamics have been getting more intense. 

Wait… Toronto Real Estate Isn’t A Bubble? 

The BoC’s indicator only looks for explosive dynamics, meaning it can’t tell us if a market is still a bubble. It only looks at whether or not trade in the quarter showed excessive growth, beyond what fundamentals would support. That doesn’t necessarily mean the market isn’t a bubble. It just means the bubble isn’t getting any bigger, but those issues are easily conflated in some of the BoC’s reports. 

Greater Toronto real estate saw 14 of the past 26 quarters show an exuberant market. It was exuberant just one quarter ago, and is still overheated. The market still has frothy valuations since home prices haven’t corrected. This index isn’t looking for frothy valuations, though. It just measures if price growth is exuberant. 

More bluntly put, this index is telling us the growth is cooling. The BoC doesn’t seem to think it’s a concern unless there is current acceleration. For context, UBS and Oxford Economics rank both Toronto and Vancouver near the top of their respective global bubble lists. 

The BoC Thinks Vancouver Real Estate Is A Rational Market

Greater Vancouver real estate is a nice and healthy market with few red flags. That’s the take from the BoC, showing just three quarters of market exuberance over a decade. One quarter in 2015 and the remaining two in 2018. A good portion of Vancouver would probably disagree, and so would global indexes. Not Canada’s central bank though. 

The BoC index is an interesting contrast with the US Fed’s Exuberance Index. Fed researchers see Canadian real estate as exuberant (bubble) at the national level. The BoC only sees exuberant activity in two cities. Either those cities are frothy enough to ring alarms for the country, or the BoC needs to work on that index. 

On an unrelated note, does the BoC still think inflation is transitory?



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  • GTA Landlord 3 years ago

    I know it was a joke but the inflation narrative is exactly what comes to mind. They aren’t interested in showing what’s happening but they’re trying to manage expectations.

    • Karen Tranh 3 years ago

      It’s actually really bad to see a central bank trying to manage expectations and play such a public role. Central bankers writing op-eds on how you should feel show they believe manipulating the public is a part of the gig.

  • Van YIMBY 3 years ago

    Imagine being the Bank of Canada and seeing the market in Vancouver and saying only 3 quarters were really bad. Did houses rise $2 million in just 3 quarters?

  • Jimmy 3 years ago

    The greater golden horseshoe. Hamilton’s been eaten up by Torontonians. There’s a reason it’s “frothy.” Torontonians can’t afford Toronto, so they moved to Hamilton where houseprices used to be a 5th of the price.

    I guess all that’s left to see is if the Torontonians move back to Toronto if the housing bubble bursts.


    • Felix 3 years ago

      I don’t know about that. I’m from Hamilton and it seems like every other person I know is talking about how much they’re making and acquiring rental properties. It’s definitely not just people from Toronto if everyone is obsessed with home prices.

      • Kim 3 years ago

        Same! I live right by Mac and housing prices have exploded. The “economic refugees” from the GTA as the Mr calls them are definitely snapping up houses, but lots of rentals, which we were hoping would turn back into family homes, are remaining as rentals. It’s a little frustrating. Who is spending $900K to rent to students?

      • Chris 3 years ago

        Bubble or not if interest rates go up can you and your neighbor afford it, mortgage goes up car payment goes up line of credit, that’s what there managing.

  • Brunolio 3 years ago

    Almost at peak Satanism.
    All for one, none for all.

  • Arthur 3 years ago

    Let’s not forget that Bank of Canada leadership is transitory. After failing in their primary purpose let’s also hope that remuneration, Christmas bonuses are also transitory this year. Roll on with the ego bubble popping at BofC.

    We are Canada’s central bank. We work to preserve the value of money by keeping inflation low and stable.

  • Jippy June 3 years ago

    Money laundering and crime run Canada now

  • Steve B Noakes 3 years ago

    My biggest regret over the past 40 years of work is not buying real estate in BC other than my principle residence.

    The few times I had spare cash or found myself clowning around in the stock market thinking I knew what I was doing, I thought the real estate market was “overheated” or a “bubble” or whatever term the media experts were using. I’ve heard over and over again since 1980 that the property market was going to bust. It never has. And now in retirement, buying real estate is definitly out of reach.

    I wish I had followed my instincts in the 1980s qnd 90s and stopped listening to media ekspirts.

  • Dave Atkins 3 years ago

    The median household income in Vancouver is around $73k while the median price of a house is, what, a million and a half? Unless every second person in the city is a participant in organized crime, there is no way those prices aren’t an unsustainable bubble that is the result of loose lending standards, low interest rates, FOMO, and too much HGTV.

  • vim 3 years ago

    It’s raining but the weatherman says it’s sunny.
    Saying Toronto isn’t in a housing bubble, what greater proof is there of
    the BofC being foolish, out of touch, and spinning irrelevant metrics.
    They’ve steered us into this mess, literally sold us out, but won’t ever admit it, and will dodge and
    fudge, and outright lie to justify their foolish decisions.
    Bank of CYA.

  • Thomas Roney 3 years ago

    These are the sort of articles that will be reprinted in 10 years from now asking ‘how could we not have seen the warning signs?’ The BOC writes this sort of crap to keep the masses at ease. Only stupid people don’t see these housing markets as absolute disaster’s running at break neck speed straight off a cliff. Just because a bubble hasn’t burst doesn’t mean everything is fine.

  • Leslie 3 years ago

    Let’s keep in mind that these are the same people (plus others) admitting they are aware of fraudulent behavior when it comes to the same real-estate market and doing nothing about it. Clearly profits above all else.

  • Ken 3 years ago

    How is the BoC not embarrassed to publish something like this. Our central bank has an opinion that runs completely contrary to the data published by virtually every international economic organization in the world. It even runs contrary to common sense, which I admit is in short supply right now. Most of the country is completely detached from every fundamental you can think of with respect to valuations. I think what this piece illustrates, is that the powers that be, are filling their pants in anticipation of the freight train that is likely headed our way in the not too distant future, so they publish a ridiculous op-ed to gloss over the situation. You’d need to be a damn fool to think this is sustainable. Canada is not an island and our ability to buck the worldwide trend of tighter monetary policy in defense of housing, is non-existent. It would be nice to see our government make some effort….similar to New Zealand… to ban foreign ownership, seize dirty money and the properties purchased with it. Our real estate industry is so greasy….rife with dirty money and shady characters. It’s all been reported, and yet we stand by and do nothing. As a result we screw over our young people while foreigners laugh all the way to the bank at our expense….shameful…what a bunch of chumps we are. I guess I went on a bit of a tangent, but the situation is depressing. A lot of people are going to get hurt before this ends.

  • Marc 3 years ago

    How do they legitimately maintain this is true when home prices are rising 50%+ in some regions?

  • JJ 3 years ago

    Bank of Canada’s observations are dumbfounding! Not sure why are the government & other municipal systems turning a blind eye to this real estate crisis in this country!

  • Houseprice 3 years ago

    BOC is manipulating all the data set. It is all a publicity stunt. It is amazing how they say one thing one day and retract on another day. House prices are insane at the moment with houses as far as Whitby and Oshawa selling north of 1.4 million and they do not see a bubble is coming from people who make 500k a year.

  • M. Valliani 3 years ago

    Where do a single family house prices shoot up by half a million in a year. Low interest rate is the main culprit. BoC should increase it without further delay instead of waiting for bursting of the bubble.

  • john 3 years ago

    Title says BoC sees two real-estate bubble then the article goes on to say the metric used cant tell if its still in a bubble or not.
    What kind of Clickbait trash is this? This is as bad as articles written on the daily hive.

    • Baio 3 years ago

      Because the BOC has no other measure of a bubble. They’re deferring to the IMF and UBS’ opinion that it’s a bubble.

      Essentially they’re pointing out that the BOC is not concerned with a real estate bubble unless it’s moving. Once that stops, they aren’t interested. Not their problem.

  • Charlie Flynn 3 years ago

    Just a thought, isn’t this a bit like a pyromaniac predicting no more fires? I know I made a lot of money when the BOC forecasted that S&P and Moodys were actually fraudulently rating mortgage-backed securities with false ratings. Oh and every time right before the real estate market dropped they predicted it perfectly to allow us all to sell our homes. NOT!! Asking the BOC or CMHC to admit their huge mistakes in forcing the real estate market to unsustainable heights is like asking Elon Musk to admit Tesla is a tad over valued

  • GEORGE GOLD 3 years ago

    Prices have to be set based on frontage, square fottage, #bathrooms, zoning, we have to get emotions out of pricing. Blind bidding should be outlawed.

  • Kelowna 3 years ago

    I’d appreciate more articles on the Okanagan / Kelowna housing market, since it is one of the hottest markets in Canada.

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