Canada’s unhinged housing market, captured in one chart
Canada’s housing market is unhinged from reality, and low interest rates — even the global pandemic — are only partially to blame, says a North American economist who expects a reckoning soon.
It is no surprise to anyone, especially homebuyers, that housing prices in Canada have been steadily rising. Over the past two decades, home prices have increased 375 per cent nationwide and in hot markets such as Toronto and Vancouver, as much respectively as 450 to 490 per cent.
Today, the average price of a home is $686,650, according to the Canadian Real Estate Association. In Ontario, that jumps to $887,290 and in British Columbia, it’s $913,471.
Even smaller markets, like Tillsonburg, Ont., or Bancroft, Ont., are seeing sharp rises in real estate prices as the pandemic drove remote workers and families out of the cities to less-crowded communities and accelerated home-buying.
Canada’s rate of housing prices increase is far more than any other developed market in the world and has given rise to a new economic term to describe the market: ‘shelter inflation.’
Yet what alarms David Doyle, head of North American Strategy & Economics at Macquarie Group, a global financial services organization, is how out of sync Canadian housing prices are with other important factors — such as income and people’s ability to pay for their high-priced homes in the years ahead.
“Prices are totally disconnected from the fundamentals,” says Doyle.
While much of the blame for Canada’s housing frenzy is placed on low interest rates, with cheap borrowing costs easing the burden of big mortgage payments, Doyle has another explanation.