Canadian property bubble

[2] In 2016, the OECD warned that Canada's financial stability was at risk due to elevated housing prices, investment and household debt.

[8] That record was broken a year later, with 63.8% of the median household income required to cover ownership costs of aggregate housing types.

[17][18] Broadbent Institute analysis concluded that Canada's "housing system is unsustainably financializing and concentrating control over basic human rights.

[23] Otherwise, Canadian housing prices from 1980 to 2001 stayed within a steady and narrow range of 3 to 4 times provincial annual median income,[24] with little effect anywhere outside of these two cities.

[23] The 2000s commodities boom (caused by rising demand from emerging-market economies such as China) boosted economic activity, particularly business investment, which generated job growth in Canada.

[29] In response to these trends, multiple levels of government attempted to slow the growth of the real estate market and gradually bring down prices, to aid first-time home buyers in a way that would cause the bubble to shrink slowly rather than burst.

[33] In addition, the province of Ontario's Fair Housing Plan set in place stricter rent controls and 16 measures to help combat the growth of the real estate market .

[42] StatsCan's Canadian Housing Statistic Program estimated in a 2019 report that one third of the Toronto condo market is owned by people who do not personally live in the units but rent them out or leave them empty.

[43] While the report does not use the word "bubble," it instead uses the term "froth," to describe "resales exceeding fundamentals" in Vancouver and Toronto in 2015-2016 and "extrapolative expectations.

[49] Instead, by the end of 2021, the Canadian Real Estate Association's House Price Index had risen by 26.6%, the fastest annual pace on record.

However, by mid-June, with fiscal spending booming and households flush with cash from stimulus, investors expected the Bank of Canada to begin raising rates in 2022.

In early 2021, Maclean's reported that zoom towns, popular with remote workers, were experiencing population growth at the expense of major urban centres.

[63] Later that same month, Oxford Economics forecasted a 24% drop in Canadian home prices by mid-2024, unless higher interest rates and anti-speculation policies fail.

[66] Contractions in CREA's MLS house price index from the peak to January 2023 met the criterion for a crash (> 20% drop in value) in London (-26%), Cambridge (-25%), Kitchener-Waterloo (-25%), Brantford (-24%), Hamilton (-23%), the Niagara region (-20%) and Barrie (-20%).

The IMF concluded that "Canada runs the highest risk of mortgage defaults among advanced economies" in their June 2023 report comparing 38 countries.

It is unknown how many properties are owned by institutional investors, such as the Ontario Teachers' Pension Plan, Blackstone Inc., and, Core Development Group.

[90][91][92][93] Foreign buyers may have a disproportionate impact on the housing market, as Reports by CMHC and IMF concluded that rising prices in Toronto and Vancouver cannot be entirely explained by credit conditions (interest rates and mortgage regulations are similar from coast to coast), income growth, or demographic factors.

[96] Foreign buyers don’t include: Some commentators have stated that Canada as whole did not have a real estate bubble; only Toronto and Vancouver really have had one.

Vancouver has experienced more direct foreign investment than other Canadian cities since the 1990s, as well as strong immigration and has therefore increased faster than the rest of the country.

Much like in British Columbia, in Ontario the fastest rising prices have been in the main urban centre, Toronto, which, like Vancouver is a major hub for foreign investment and immigration.

[98][99] In 2021, $500,000 sufficed to purchase a five-bedroom, four-bathroom detached home on Killarney Road, New Brunswick (a commuter town near the provincial capital, Fredericton), but only a 495-square-foot one-bedroom condo in Vancouver's Kitsilano neighbourhood.

Stephen Schneider, criminology professor at St. Mary's University in Halifax stated "I've never seen such a big operation … that is so geographically confined."

[104] The Cullen Commission estimated that in 2019 alone, $5.3 Billion of illicit funds was laundered through the Vancouver real estate market, which increased housing prices by 5%.

[104] "The Vancouver Model" is a way for Chinese organized crime to launder revenue generated primarily by fentanyl sales through casinos.

[105] In 2016, Transparency International Canada found that 33% of the most valuable residential real estate in Vancouver was owned by shell companies and at least 11% have a nominee listed on their title.

The resulting report[108] recommended the disclosure of beneficial ownership, among other steps the government could take to address money laundering in the province.

A study by the International Monetary Fund (IMF) in 2018 concluded that Canada was the 2nd most responsive to housing demand of 20 advanced economies.

[117] BMO Chief Economist Doug Porter summarized "Over the past 45 years or so, the ratio [of housing starts to growth in working age population] has typically been about 0.60 (about one new build for every 1.7 additional adult).

[127] There is a high risk that if investor sentiment changes, buyer demand may drop significantly, triggering a vicious cycle of prices declines that snowball.

If the reset rate in five, ten, or fifteen years is higher than in the past, there will be a large risk of default for Canadians with high amounts of debt.