Updated on February 9, 2024
If you’re a Canadian resident or considering a move, this article is a must-read. Discover all about the Canada Housing Bubble: What it is, and when it might burst. We’ve got all the details you need.
Canada Housing Bubble
Currently, Canada is grappling with a housing crisis that’s affecting its residents and foreign students alike. There’s discussion about potentially restricting the number of foreign students entering the country because of the escalating housing crisis.
With substantial mortgages, household debt, and soaring home prices, Canada is facing unprecedented challenges. While some economists foresee worsening affordability, others anticipate eventual price declines. Consequently, several analysts suggest that Canada is presently grappling with “one of the largest housing bubbles of all time.”
This article delves into the current housing situation in Canada, exploring the likelihood of the housing bubble bursting.
What is Housing Bubble Canada?
A housing bubble refers to a sudden surge in prices fueled by speculation, high demand, and a shortage of housing. Eventually, these unsustainable prices reach a tipping point, leading to the bubble bursting. There’s growing concern about the housing bubble in Canada, with some observers suggesting that its collapse is inevitable.
Some observers characterize the significant rise in Canadian real estate prices since 2002 (with only brief dips in 2008 and 2017) as the “Canadian property bubble.” Prices have surged notably since the 1980s, outpacing income growth. Additionally, low interest rates have become standard in Canada since the 2008 financial crisis.
Canada Housing Bubble Overview
| Article | Canada Housing Bubble |
| Affected area | Canada’s Real estate Business |
| Housing Price Increase Beginning | 2008 |
When will it burst?
A reputable analyst suggests that if Canada’s economy collapses and a substantial number of jobs are lost, the housing bubble is likely to burst. The Canada Mortgage and Housing Corp. warns that Canadians, burdened by significant debt, may struggle to weather a recession.
According to economist Phillip Colmar, if Canada’s housing bubble, purportedly one of the largest of all time, were to burst, the nation might face a more protracted recession than expected. While Colmar doesn’t foresee an imminent housing crisis, he does caution about the risks associated with such excesses, expressing hope that interest rates remain stable.
Colmar asserts that the Bank of Canada’s monetary policy, characterized by easy money over two decades, is chiefly responsible for Canada’s inflated property prices. He highlights the growing risk associated with mortgage rates, particularly as Canadian bond yields rise, given the already extremely high debt-to-income ratios prevalent in the country.
Canada’s Housing Status
According to data released by Statistics Canada in June 2023, mortgage interest payments surged by 12.6% between the first and fourth quarters of 2022 and 2023.
This increase aligns with a rising trend that commenced in early 2022 due to multiple rate hikes. Mortgage interest payments surged by nearly 70% in the first quarter of 2023 compared to the same period in 2022.
Moreover, in the first quarter of 2023, there was $1.85 in credit market debt for every dollar of disposable household income. A recent RBC analysis released this month revealed that Canadians aged 35 to 44 had a total debt-to-disposable income ratio of 150% in 2019.
In this article, we have attempted to shed light on Canada’s housing bubble situation and the associated challenges.