The Canadian property bubble refers to a significant rise in Canadian real estate prices from 2002 to present (with short periods of falling prices in 2008 and 2017) which some observers have called a real estate bubble. The Dallas Federal reserve rated Canadian real estate as exuberant beginning in 2003. From 2003 to 2018, Canada saw an increase in home and property prices of up to 337% in some cities. In 2016, the OECD warned that Canada's financial stability was at risk due to elevated housing prices, investment and household debt. By 2018, home-owning costs were above 1990 levels when Canada saw its last housing bubble burst. Bloomberg Economics ranked Canada as the second largest housing bubble across the OECD in 2019 and 2021. Toronto scored the highest in the world in Swiss bank UBS' real estate bubble index in 2022, with Vancouver also scoring among the 10 riskiest cities in the world. Currently, (as of 2023) Canada’s nonfinancial debt exceeds 300% of GDP and household debt continues to surpass 100% of GDP as of 2023, both higher than the levels seen in the United States before the 2008 global financial crisis.
History
Background factors
Canada's last housing busts happened during the early 1990s recession, when Canada was facing low commodity prices, a large national debt and deficit that was weakening the value of the Canadian dollar, the possibility of Quebec independence, and a recession in Canada's main trading partner, the United States. Average house prices declined by over 27% in Greater Toronto from 1989 to 1996. Vancouver’s first housing bubble burst in 1981, the second declined gradually in 1994. Otherwise, Canadian housing prices from 1980 to 2001 stayed within a steady and narrow range of 3 to 4 times provincial annual median income, with little effect anywhere outside of these two cities.
The decline of Quebec separatism after the 1995 referendum and 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. During this time, significant rural-to-urban migration and immigration to Canada likely contributed to the pressure on house prices. By 2010, Canada began experiencing, for the first time since 1980, a synchronized housing bubble across the six largest residential real estate markets in Canada, which represent approximately 40% of all real estate sales in Canada.
Although representing only a minority of real estate investors in Canada (less than 5%), targeting foreign investors has proven politically popular, and a ban on foreign buyers was put into effect on Jan 1, 2023 until 2025.
This influx of foreign investment was reinforced by local speculative activity facilitated at a steady drop in interest rates. Once the pattern of rising prices was established, consumers interpreted this as proof that the real estate market had become the perfect option for stable, long-term investments. There is debate on which group of investors, overseas or domestic, play a bigger role in driving rising prices. The belief that there was a limited supply of homes on the real estate market quickly brought new consumers into the market. In addition, owning a home is a sought-after ideal for many young adults in Canada. These social pressures, along with increasing opportunities for profit, were the driving forces behind the growth of the market, causing first-time home buyers to struggle to find affordable housing.
In March 2017, the cost of owning a single-family house in the Greater Toronto Area had grown 33% in 12 months. Even less desirable semi-detached homes had surpassed C$1 million in value. Suburban areas had seen large price increases as well. Homes that had not seen upgrades in decades were being sold well over the asking price. Condominium prices were consistently growing each year, even though a large number of units were under construction.