Why are Canadian house prices outpacing other nations? New research provides insight
Housing prices in Canada climbed faster than those in most developed countries, more than doubling since 2005, according to a new report.
Research shared by the Canada Mortgage and Housing Corporation (CMHC) on Tuesday looked into the country’s house prices and compared trends with other countries.
“Canada’s housing challenge isn’t just that home prices rose. It’s that demand grew faster than supply for longer than in many comparable countries,” Aled ab Iorwerth, deputy chief economist for the Crown corporation, said in a news release Tuesday. “Understanding why that happened can help identify the changes needed to improve affordability.”
CMHC looked into potential factors behind the elevated prices. Among its key findings, it determined that record population growth has “far outpaced new construction.” According to researchers, nearly five new residents were added for each “housing completion” in 2023 and 2024.
In addition, CMHC found that housing supply has “not kept pace with demand as effectively as in several peer countries.” The Crown agency noted factors behind that trend, including population growth, low borrowing costs and rising incomes.
Housing affordability in Canada worsened in recent years. The problem began in Vancouver in the early 2000s, according to CMHC’s report, then after hitting Toronto in the early 2010s, it spread to Ottawa, Montreal, Halifax and other major cities.
Trends since 2008-09 global recession
Researchers found that while Canada, Australia and Sweden saw “modest declines” in house prices during the 2008-09 global recession, the countries later experienced “steady” house price growth through 2022.
“The key difference is not what happened during the (global financial) crisis, but rather what happened afterward,” the report said. “Canada’s house prices continued to grow rapidly for over a decade, eventually outpacing most peer countries.”
In contrast, house prices plunged in the United States during the global financial crisis.
Even if Canada experienced a similar correction like its southern neighbours, it would still have one of the world’s fastest growing house prices, according to the CMHC.
“This suggests that the forces behind Canada’s affordability challenges developed over many years and cannot be attributed to a single event. Understanding these longer-term drivers is essential to understanding Canada’s high house prices.”
According to the CMHC, population growth, with migration as a factor, is a major source behind housing demand and has “significant effect” on house price growth.
“Over the past 20 years, countries with faster population growth generally saw stronger real house price growth,” according to the study.
Canada, Australia, New Zealand, Norway and Sweden were among the countries that experienced that trend. Within the group, Canada saw the highest growth in house prices over two decades.
