10 Incredible Numbers from Canada’s Real Estate Bubble

Canada Housing BubbleCanada’s Real Estate Bubble Is Jaw-Dropping

Canada’s housing market is overpriced and the nation’s real estate bubble is due to burst at any moment. At least, that’s what we’re told.

This message has been repeated so often that many Canadians have tuned out the conversation altogether. But lately, the country’s housing market has defied reason. Despite years of stagnant wages and a slowing economy, real estate prices continue to soar at a nearly double-digit clip.

Regardless of your views on real estate, the nation’s two-decade-long housing boom has produced some jaw-dropping statistics. Here are 10 incredible numbers from Canada’s real estate bubble.

1. $1,226,300

A shortage of listings and intense demand is driving up prices beyond any bounds of reason. In Calgary, the average detached house sold for $509,392 in November. In Toronto, just a semi-detached home will set you back $750,608.

However, Vancouver’s real estate market really takes the cake. According to the Real Estate Board of Vancouver, the benchmark price for a detached house in the Metro Area increased 22.6% year-over-year in November to $1,226,300.

2. $7,500 per Month

According to the Toronto Real Estate Board, the price of a detached family home averaged $1,018,621 in November, up 8.8% year-over-year. If you were to break down that increase, then homeowners saw the value of their home grow by $7,500 on average each month over the last year.

3. 11.2x Income

Personal finance experts recommend families spend no more than three times their gross household income on a house, but with real estate prices outpacing stagnant incomes, this advice is comically out of date.

Based on adjusted income data from Statistics Canada and the National Average Price Map from the Canadian Real Estate Association, Canadians now pay a record-high 5.4 times their income for housing. In Toronto, this ratio has hit a record 8.2 times income and in Vancouver, this ratio stands at a record 11.2 times income.

4. 66.3 % Overvalued

No conversation is more controversial than the debate between renting and owning a home. But according to data provided by the Organisation for Economic Co-Operation and Development (OECD), there has never been a better time to be a renter.

Based on the agency’s data, housing prices have far outpaced rents in Canada over the past 20 years. In the OECD’s view, real estate is now 66.3% overvalued relative to rents.

5. 900,000 Jobs

Such a boom in real estate has reshaped the Canadian economy. Today, more than 900,000 people are employed in home construction, renovation and repair. This figure doesn’t include the hundreds of thousands of people in industries directly tied to real estate, including finance, government and other trades. In total, residential housing represents 8.9% of Canada’s gross domestic product.

6. 42,000 Realtors

According to the Toronto Real Estate Board, there are 42,000 licensed brokers working in the Greater Toronto Area. This means one out of every 133 people in Canada’s largest city is a real estate agent.

7. $1.87 Trillion in Debt

What is fuelling the nation’s housing boom? Debt.

By the end of the second quarter, total household debt in Canada hit a record $1.87 trillion. Canadians now hold a record $1.65 in debt for every $1.00 of disposable income. This figure is far larger than the levels seen in the United States at the peak of the country’s debt binge in 2005.

8. 70% of Home Sales

Foreign speculators are also responsible for driving up home prices. In a November presentation, Canadian Mortgage and Housing Corporation (CMHC) chief Evan Siddall cited a 2013 study from Sotheby’s that found 40% of luxury home sales in Vancouver and 25% in Toronto were to international buyers.

Siddall also referred to a recent study from Vancouver urban planner Andy Tan that reported nearly 70% of luxury homes in West Vancouver could be traced to Mainland Chinese buyers.

9. 26% Price Collapse

With prices so frothy, even a small hit to the economy could hammer real estate prices. In a presentation to a private audience in New York last month, the CMHC predicted Canadian home prices could crash 26% if oil prices stay below $35.00 per barrel. In such a scenario, Canada’s unemployment rate could spike to 12%.

10. 294,000 Underwater Households

A bursting of Canada’s real estate bubble would devastate households. According to a study from the Canadian Centre for Policy Alternatives (CCPA) senior economist David MacDonald, a 20% decline in home prices across Canada would put 169,000 families under the age of 40 underwater on their mortgages. If prices fell 30%—in line with the amount the Bank of Canada says prices are overvalued—there would be 294,000 underwater families under the age of 40, which translates to one in every seven households in this age group.

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