# Is Canadian Real Estate Seriously Over-valued? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [December 14, 2013, 7:40pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320 "2013-12-14T19:40:13Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Spoons](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/spoons/32/3141_2.png) [@Spoons](https://boards.straightdope.com/u/Spoons)\ **Post date:** [December 16, 2013, 6:06am UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/21 "2013-12-16T06:06:04Z")
> [@astro](#): > > There is a limited supply of existing housing stock in many areas… This is what I’m thinking; and I’d extend it to desirable areas. If you want a single-family fully-detached house with a private driveway in (say) downtown Toronto, you’re going to pay a lot for it. The same house, in rural or small-town Alberta, will cost you a lot less. There are plenty of such places in Alberta (and for that matter, Saskatchewan and Manitoba), but they do not come with the amenities (public transit, restaurants, theatre, etc.) as Toronto offers. And there is only so much “downtown Toronto” to build or buy in. So, supply and demand comes into play: the Toronto house’s price is much higher. When you get right down to it, we Canadians inhabit a huge country with few places to live. We might as well be Chile–most of us live in a thin strip within 100 miles of the US border. We have big cities–Toronto, Montreal, Calgary, and Vancouver–and plenty of smaller cities and towns; but few people want to live in remote areas, or in places that cannot offer what the bigger places do. Those that do, get a price break, in most cases. Those that don’t will have to pay for the privilege. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [December 16, 2013, 6:15am UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/22 "2013-12-16T06:15:18Z")
> [@PunditLisa](#): > > All I know is that whenever I watch one of those Canadian real estate shows (e.g. Property Brothers, Income Property, etc.), I’m shocked at how high the prices are north of the border. I’m talking a 1500 sq ft bungalow for $650k! I think those shows are all set in Toronto, which has high prices, for the reasons **Spoons** sets out. Will not necessarily apply to other municipalities. ---
**Author:** ![Spoons](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/spoons/32/3141_2.png) [@Spoons](https://boards.straightdope.com/u/Spoons)\ **Post date:** [December 16, 2013, 7:14am UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/23 "2013-12-16T07:14:02Z")
> [@PunditLisa](#): > > All I know is that whenever I watch one of those Canadian real estate shows (e.g. Property Brothers, Income Property, etc.), I’m shocked at how high the prices are north of the border. I’m talking a 1500 sq ft bungalow for $650k! > [@Northern\_Piper](#): > > I think those shows are all set in Toronto, which has high prices, for the reasons **Spoons** sets out. Will not necessarily apply to other municipalities. **Lisa** , that’s about right. As I said above, people want to move to Toronto, (and **NP** backs that up) so supply and demand rules. Toronto prices are high, because people want to be there. I grew up in downtown Toronto, and I cannot afford to move back. I’m not sure I’d want to, for various reasons; but the fact remains: I cannot move back to my hometown because of the cost. Thankfully, I have a nice house and career here, and feel no need to move back to Toronto. . ---
**Author:** ![Cat\_Whisperer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cat_whisperer/32/4839_2.png) [@Cat\_Whisperer](https://boards.straightdope.com/u/Cat_Whisperer)\ **Post date:** [December 16, 2013, 7:31am UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/24 "2013-12-16T07:31:23Z")
That brings up a germane point; if we do indeed have a bubble going on and it bursts, I don’t think it would affect rural people or people in smaller towns very much, but the majority of Canadians do live in larger cities. ---
**Author:** ![PunditLisa](https://avatars.discourse-cdn.com/v4/letter/p/4af34b/32.png) [@PunditLisa](https://boards.straightdope.com/u/PunditLisa)\ **Post date:** [December 16, 2013, 12:37pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/25 "2013-12-16T12:37:25Z")
> [@Spoons](#): > > **Lisa** , that’s about right. As I said above, people want to move to Toronto, (and **NP** backs that up) so supply and demand rules. Toronto prices are high, because people want to be there. Stupid question, but does that mean that the wages are significantly higher, too? I mean, how can a teacher or waitress live there? (P.S. I wonder the same thing about Los Angeles and San Fran.) ---
**Author:** ![Colophon](https://avatars.discourse-cdn.com/v4/letter/c/f05b48/32.png) [@Colophon](https://boards.straightdope.com/u/Colophon)\ **Post date:** [December 16, 2013, 1:42pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/26 "2013-12-16T13:42:18Z")
> [@Sparky812](#): > > I ran into an old childhood neighbour who told me he bought their house for $14K in 1973 on a 10 year mortgage. He sold it a couple of years ago for $280K but could have easily gotten $350K+ today. > > Inflation is a funny thing, these days I could write a cheque for $14K. My parents bought their house for £6,100 in 1971 - on a 25-year mortgage! My wife and I bought it off them a few years back for £200k and it’s probably closer to £250k now - north of $400k Canadian (or US) and it’s only a little over 900 sq ft. ---
**Author:** ![elbows](https://avatars.discourse-cdn.com/v4/letter/e/b3f665/32.png) [@elbows](https://boards.straightdope.com/u/elbows)\ **Post date:** [December 16, 2013, 2:39pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/27 "2013-12-16T14:39:02Z")
The woman we bought our century cottage from, owned it 42 yrs, purchased it for $10,000! Sold it to us for $100,000! Not too shabby, right? We’ve owned it for just over a decade and it is now worth more than double what we paid! Real estate prices always amaze me. In Toronto, as is often pointed out by visiting Torontonians, it would be worth more than half a mil! But in our case it has more to do with, 'they don’t make ‘em like this anymore’, than a red hot market, in my smallish city. ---
**Author:** ![elbows](https://avatars.discourse-cdn.com/v4/letter/e/b3f665/32.png) [@elbows](https://boards.straightdope.com/u/elbows)\ **Post date:** [December 16, 2013, 2:44pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/28 "2013-12-16T14:44:02Z")
The woman we bought our century cottage from, owned it 42 yrs, purchased it for $10,000! Sold it to us for $100,000! Not too shabby, right? We’ve owned it for just over a decade and it is now worth more than double what we paid! Real estate prices always amaze me. In Toronto, as is often pointed out by visiting Torontonians, it would be worth more than half a mil! But in our case it has more to do with, 'they don’t make ‘em like this anymore’, than a red hot market, in my smallish city. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [December 16, 2013, 3:00pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/29 "2013-12-16T15:00:00Z")
I first heard of the terrible Canadian real-estate bubble in, oh, 2003, 2004? It was about to burst then. I was thinking of buying a house then and the advice I got was to just wait, prices were bound to come down from the absurd high. So I have literally been hearing about this bubble for a decade. Thankfully, I did not take the earnest advice I was given, which was to wait it out and buy after the “bubble has burst”. Since I bought my house, it has more than doubled in value (at least according to tax assessors and local real-estate sales), which means I could not afford it if I was to attempt to buy it today. As a result, I have become convinced those who think they can time the market don’t know shit. Someday no doubt there will be a big price decrease, prices do have to fluctuate, but I would not be betting on its timing. Eventually, those predicting a massive decrease will prove correct, because bubbles do happen and they do burst. But this constant bubble-prediction over the past decade has made me wary about timing. It’s the boy who cried bubble. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [December 16, 2013, 3:13pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/30 "2013-12-16T15:13:16Z")
Here’s an article about the great Canadian bubble debate - from 2005. [http://www.canada.com/national/nationalpost/financialpost/story.html?id=33dddb8e-b351-4a48-a31e-2d61e515e7fa](http://www.canada.com/national/nationalpost/financialpost/story.html?id=33dddb8e-b351-4a48-a31e-2d61e515e7fa) ---
**Author:** ![Colophon](https://avatars.discourse-cdn.com/v4/letter/c/f05b48/32.png) [@Colophon](https://boards.straightdope.com/u/Colophon)\ **Post date:** [December 16, 2013, 3:15pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/31 "2013-12-16T15:15:20Z")
There were lots of dire warnings of a crash here in the UK. Then when the credit crunch hit in 2007/2008 all the doom-mongers were saying, “Ha, here comes the crash!”, and sure enough prices dipped a bit, but then… nothing. Certainly in the south, anyway, prices are still roaring ahead. In London they are now 40% above the pre-“crash” peak in 2007. Mind you, we have a lot less land and a lot more people than Canada, so it seems rather surprising that Canadian prices are also overheated. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [December 16, 2013, 3:21pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/32 "2013-12-16T15:21:30Z")
> [@Colophon](#): > > There were lots of dire warnings of a crash here in the UK. Then when the credit crunch hit in 2007/2008 all the doom-mongers were saying, “Ha, here comes the crash!”, and sure enough prices dipped a bit, but then… nothing. Certainly in the south, anyway, prices are still roaring ahead. In London they are now 40% above the pre-“crash” peak in 2007. > > Mind you, we have a lot less land and a lot more people than Canada, so it seems rather surprising that Canadian prices are also overheated. Canada is indeed vast, but the places in Canada people actually want to live in are considerably more restricted. ---
**Author:** ![Colophon](https://avatars.discourse-cdn.com/v4/letter/c/f05b48/32.png) [@Colophon](https://boards.straightdope.com/u/Colophon)\ **Post date:** [December 16, 2013, 4:44pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/33 "2013-12-16T16:44:52Z")
> [@Malthus](#): > > Canada is indeed vast, but the places in Canada people actually want to live in are considerably more restricted. That’s true, but even the “crowded” parts of Canada (eg southern Ontario) look pretty empty from a cursory flyover in Google Earth, compared to much of the UK. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [December 16, 2013, 4:53pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/34 "2013-12-16T16:53:48Z")
> [@Colophon](#): > > That’s true, but even the “crowded” parts of Canada (eg southern Ontario) look pretty empty from a cursory flyover in Google Earth, compared to much of the UK. Yes, but even Southern Ontario is still pretty vast, and real estate values there vary considerably. The most expensive real estate is in the city of Toronto itself, and in areas adjacent to it with a (relatively) easy commute, like Oakville. Toronto is undergoing something of a revolution in density - everywhere you look new high-rises are going up (I can well believe we are headed to an over-supply of condos - the amount of new construction is staggering). But prices there still pale in comparison with London and environs. As is only natural. ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [December 16, 2013, 7:48pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/35 "2013-12-16T19:48:10Z")
I love this thread. It’s the best proof yet of a Canadian bubble in real estate pricing. All the classic signs are there, including: … Tales and data of extreme rises in equity/home value … Declarations that it’s different this time, however … Links to articles forewarning of this problem from a long time ago, and it didn’t come true then … But even if it is a bubble, it’s localized into just a few markets … Therefore, no problem! 🙂 [These 18 countries may have a housing bubble. If it pops, God help us all](http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/02/these-18-countries-may-have-housing-bubbles-if-they-pop-god-help-us-all/), from earlier this month. However, it’s not just Canada. Sweden, China ([ghost cities](http://www.zerohedge.com/news/2013-09-21/chinas-ghost-cities-are-multiplying), anyone?), Norway, France, Germany, and more have all exhibited the standard signs of being in a classic housing bubble, so much so that it’s commonly referred to as “the \*global \*housing bubble.” So, Canada is likely in a housing bubble. If they can grow their way out of it or if the thing pops, that is what remains to be seen. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [December 16, 2013, 8:29pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/36 "2013-12-16T20:29:01Z")
> [@JohnT](#): > > I love this thread. It’s the best proof yet of a Canadian bubble in real estate pricing. All the classic signs are there, including: > > … Tales and data of extreme rises in equity/home value > … Declarations that it’s different this time, however > … Links to articles forewarning of this problem from a long time ago, and it didn’t come true then > … But even if it is a bubble, it’s localized into just a few markets > … Therefore, no problem! > > 🙂 > > [These 18 countries may have a housing bubble. If it pops, God help us all](http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/02/these-18-countries-may-have-housing-bubbles-if-they-pop-god-help-us-all/), from earlier this month. > > However, it’s not just Canada. Sweden, China ([ghost cities](http://www.zerohedge.com/news/2013-09-21/chinas-ghost-cities-are-multiplying), anyone?), Norway, France, Germany, and more have all exhibited the standard signs of being in a classic housing bubble, so much so that it’s commonly referred to as “the \*global \*housing bubble.” > > So, Canada is likely in a housing bubble. If they can grow their way out of it or if the thing pops, that is what remains to be seen. The problem with these “classic signs” is that they have exactly zero specific predictive value. They were all there every single year of the past decade. Sure, some day they will be true. It is inevitable that, yes, eventually there will be a real estate bubble. The problem is predicting when. It is the sort of thing that is annoying, because those who make such predictions never, ever take any blame when they fail to materialize. It is sort of like predicting death. Yes, eventually you will be right if you predict someone’s death, but what they really want to know is not whether they are going to die, but when. 😃 Say “the signs point to the bubble popping in the first quarter of 2014” or suchlike. Like these guys, who deemed the “bubble close to bursting” in 2011: > **[Canada's 'housing bubble' deemed close to bursting | CBC News](https://www.cbc.ca/news/business/canada-s-housing-bubble-deemed-close-to-bursting-1.1056969)** > > Canada's housing market is in a bubble that's set to burst and prices could plunge by as much as 25 per cent, a major independent research firm warns. Of how about Mclean’s, who stated definitively that the great Canadian housing bubble has already burst - in early 2013. [http://www2.macleans.ca/2013/01/09/crash-and-burn/](http://www2.macleans.ca/2013/01/09/crash-and-burn/) ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [December 16, 2013, 8:34pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/37 "2013-12-16T20:34:48Z")
Well, the question isn’t “when will the bubble burst”, but “is there a bubble to begin with.” That’s the question I was answering. And you’re not alone - it’s happening again here in the US. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [December 16, 2013, 8:50pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/38 "2013-12-16T20:50:26Z")
> [@JohnT](#): > > Well, the question isn’t “when will the bubble burst”, but “is there a bubble to begin with.” That’s the question I was answering. > > And you’re not alone - it’s happening again here in the US. Seems to me something that, as far as I can tell, can only be truly known in light of events. A dramatic market correction = there was clearly a bubble. Then, when it has happened, everyone looks at the indicators which (in hindsight) make the bubble obvious. The trouble comes when they use those indicators to pin down future bubbles - only to see them not happening. The problem is that housing markets, like any markets, are subject to periodic fluctuations and corrections. The difficult lies in predicting them in advance. My point is that, to date, the experts have been piss-poor at such predictions. Any year you care to name over the past decade, some experts are predicting a bubble bursting. Every single one. Which is why I’m not overly excited this time around. It could well be true that we are in a bubble. Eventually, the experts will be right - as tends to happen when you predict, every year, an event which markets are prone to experience periodically. ---
**Author:** ![Grey](https://avatars.discourse-cdn.com/v4/letter/g/b782af/32.png) [@Grey](https://boards.straightdope.com/u/Grey)\ **Post date:** [December 16, 2013, 8:55pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/39 "2013-12-16T20:55:30Z")
> [@JohnT](#): > > [These 18 countries may have a housing bubble. If it pops, God help us all](http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/02/these-18-countries-may-have-housing-bubbles-if-they-pop-god-help-us-all/), from earlier this month. > > … > > So, Canada is likely in a housing bubble. If they can grow their way out of it or if the thing pops, that is what remains to be seen. You know, just for once I would love it if people trying to make comparisons with charts would actually make the charts the same way. Why newspapers can’t do this is an enduring mystery. Take the Washington Post’s article, especially the last two charts. One shows Canadian Household Debt to GDP with a y-axis range of 65% to 100% across 8 years (2005 to 2013). It shows a fairly steady growth but has a relatively flat 2009-2013 value of ~93%. That somewhat undermines the contention of relentless growth while the US prudently deleverages. The other shows US Household Debt to GDP with a y-axis range of 82. %% to 102.5% and one that only spans 2009-2013. In it US values are dropping fairly steadily with a midpoint value of ~ 92% in 2011. You’d think that value would be more impressive if we’re stating a crisis exists in the Canadian marketplace. It’s not much better with the 1st two charts. These supposedly show home prices (though the Canadian one is New Homes and the US data is a 20 city composite number). Still at least they are covering the same year range (2003-2013). The Canadian range is 75-110 while the US one is 130-210. A better view would be to baseline at 2000 values and show % change over time. We’ve had housing bubbles before in Canada (especially T.O. and Vancouver) and we may even be in a new one with Calgary and Saskatoon joining in (lord help me I said Saskatoon and housing bubble – who would have thought it?) but if so, this article isn’t what’s going to convince me. ---
**Author:** ![Implicit](https://avatars.discourse-cdn.com/v4/letter/i/6a8cbe/32.png) [@Implicit](https://boards.straightdope.com/u/Implicit)\ **Post date:** [December 16, 2013, 10:00pm UTC](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320/40 "2013-12-16T22:00:21Z")
> [@astro](#): > > What’s different from years past in the US is that there is no longer the assurance that housing prices will always rise and both US buyers and lenders are more cautious than their pre-2007 counterparts. If Canada residential real estate did not get hit with the body blow that the US did it’s possible this deep cultural shock was never experienced. Canada still got hit with the with the worldwide credit shock and recession that the US collapse precipitated. Housing sales stalled and dropped here, just not as severely as in the US and they appear to have recovered quicker. > [@](#): > > It would be interesting to know the increase in Canadian salaries over the past several years. More relevant might be interest rates, since the high housing prices are relatively affordable due to the current very low interest rates. If those interest rates spike, then you might see downward pressure on prices. [Previous page](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320.md?page=1) [Next page](https://boards.straightdope.com/t/is-canadian-real-estate-seriously-over-valued/676320.md?page=3)