Canada’s Real Estate Bubble Is So Big Even The Mother Of All Crashes Can’t Fix It

Posted by Stephen Punwasi,

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Canadian real estate is now some of the most expensive in the world. Home prices across the country, not in pricey hubs, are now comically overvalued. At this point, not even a major housing crash can restore affordability. Many think this is pandemic-related, but overvaluation has long been a concern. For at least a decade, the central bank, government, and various agencies have rung the alarms. Let’s go through some of the numbers and see what price points they felt were a concern, and proceeded to do nothing.

More Than Half Of Canadian Households Couldn’t Buy A Home Today

First, let’s start where the Canadian real estate market is currently sitting. The composite benchmark, (a.k.a. a typical home) was $798,200 in December, up 27.8% from a year before. It is at an all-time high for both price and annual growth. How does this stack up with household incomes?

National Bank of Canada’s latest estimate shows a down payment and income are far out of reach for most. A median household needs 6 years of savings for a down payment, double the average from 2000. Even if you have the down payment, incomes need to rise 88% higher to qualify for a mortgage. More than half of the country has zero chance of qualifying for a mortgage.

Good thing more than half of the country already owns a home, so this is just a problem for young people. To complicate the issue further, the academic-led non-profit Generation Squeeze highlights income disparity. When you say median income, you’re also referencing more established and older households. The median buyer looking to get into the market makes much less. On an inflation-adjusted basis, people between 25 and 34 years of age make less than they did in the 1970s. Affordability is rough for everyone, but try being at the bottom of experience and skill…read more.