Background factors Canada's last housing busts happened during the
early 1990s recession, when Canada was facing low commodity prices, a
large national debt and deficit that was weakening the value of the
Canadian dollar, the possibility of
Quebec independence, and a
recession in Canada's main trading partner, the United States. Between 1986 and 1989, housing costs in Toronto increased by 150%, the highest four-year price escalation to date. This spike corresponded with the introduction of the
Canadian Immigrant Investor Program in 1986, a type of "golden visa" that allowed high-wealth individuals and their families a pathway to permanent residency; as well as the plummeting of five-year mortgage rates from over 21% in 1981 to 10.2% in 1987. Two years after 5-year mortgage rates began increasing (from 11.25% eventually to over 14%), The
Canadian Immigrant Investor Program ended in 2014, Vancouver’s first housing bubble burst in 1981, the second declined gradually in 1994. Otherwise, Canadian housing prices from 1980 to 2001 stayed within a steady and narrow range of 3 to 4 times provincial annual median income, with little effect anywhere outside of these two cities. During this time, significant
rural-to-urban migration and
immigration to Canada likely contributed to the pressure on house prices. By 2010, Canada began experiencing, for the first time since 1980, a synchronized housing bubble across the six largest residential real estate markets in Canada, which represent approximately 40% of all real estate sales in Canada.
Attempts to slow price growth 2016–2017 In 2015, the
IMF further detailed their concern as house prices being 9-20% overvalued, while the Bank of Canada estimated 10-30% overvaluation. In December 2015, the benchmark price of housing in Metro Vancouver increased by 18.9% year over year. In March 2017, the cost of owning a single-family house in the
Greater Toronto Area had grown 33% year over year. In May 2017, the
IMF again expressed concern to Canada’s Standing Senate committee on National Finance in an in-person meeting. Specifically related to housing exposure, household debt, and rapid acceleration of home prices. This was shortly before
Moody’s downgraded the credit ratings of the Big Six Canadian banks, citing increased private sector debt and elevated house prices. Multiple levels of government attempted to slow the growth of the real estate market and gradually bring down prices, to aid first-time home buyers in a way that would cause the bubble to shrink slowly rather than burst in this period of time. In October 2016, Finance Canada introduced a
stress test for insured mortgages, to ensure that buyers would continue to afford their mortgage in the event that interest rates rose. British Columbia instituted a 15% foreign buyer's tax, termed the National resident Speculation tax. In 2017, Ontario followed suit with a 15% property transfer tax on foreign buyers in the Greater Golden Horseshoe region. and the city of Vancouver introduced a vacant property tax. In addition, the province of Ontario's Fair Housing Plan set in place stricter
rent controls and 16 measures to help combat the growth of the real estate market . These remedies coincided with a slight dip in housing prices in 2017 which some believed was the beginning of a housing crash; however this did not come to pass.
2018 and 2019 signs of risk Despite prices easing, the
Canadian Mortgage and Housing Corporation noted that the housing market remained vulnerable and cited
overbuilding (high rental vacancy or inventory of unsold new-builds) as an indicator of the country's housing bubble risk. Other signs of financial risk included: • Canadian private sector
debt-to-GDP ratio rising to 218% in 2018 • In
Alberta, despite a
recession and high unemployment, real estate prices in Calgary dropping less than 5%. The
OSFI revised and expanded the mortgage
stress test in 2018 to uninsured mortgages,
StatsCan's Canadian Housing Statistic Program estimated in a 2019 report that one third of the Toronto condo market is owned by people who do not personally live in the units but rent them out or leave them empty. While the report does not use the word "bubble," it instead uses the term "froth," to describe "resales exceeding fundamentals" in Vancouver and Toronto in 2015-2016 and "extrapolative expectations." The
Bank for International Settlements found Canada to be the only country in their analysis that presented warning indicators in all four categories of financial stress. House prices did not drop significantly during this time, but rather stagnated through 2019.
Pandemic 2020 to 2021 The housing market experienced a brief slowdown during the onset of the pandemic, especially for condos in larger cities. In response to the pandemic, the
Bank of Canada slashed interest rates three times in one month and reduced the mortgage "stress test" rate, which enabled buyers to qualify for slightly larger mortgages. Prices soon rebounded. By June 2020, detached home prices had increased in 95% of Toronto districts, with double-digit increases in most (55%) of them. This defied many
predictions, including those by the CMHC, which had forecasted prices falling by 9–18% and for house prices and sales to not recover their pre-pandemic levels until 2023 onwards. Instead, by the end of 2021, the Canadian Real Estate Association's House Price Index had risen by 26.6%, the fastest annual pace on record. Incomes did not keep up. Condominiums accounted for the bulk of new housing in BC (54%) and Ontario (59%), where sales rose 71%
yoy and investors constituted an increasing share of the buyers of these units (41% in Ontario). On February 23, 2021, Bank of Canada Governor
Tiff Macklem said the Bank was only starting to see "early" signs of "excessive exuberance". In a Q&A, he said the Bank was not considering any additional measures to cool the market, saying: "We need the growth." While other countries were attempting to cool their overheated markets, Canada was not, citing concerns about the economic recovery. The Bank indicated that it would continue to hold firm on low interest rates until likely 2023, resisting calls from investors and economists that higher rates were needed. However, by mid-June, with fiscal spending booming and households flush with cash from stimulus, investors expected the Bank of Canada to begin raising rates in 2022.
Zoom towns, popular with
remote workers, were experiencing growth at the expense of major urban centres. Notably: During the COVID-19 pandemic, while the housing sector grew, much of the rest of the Canadian economy did not. Jeremy Kronick, associate director of research at the C.D. Howe Institute summarized "data from Statistics Canada show that, for the first time on record, investment in the housing market is now greater than 50 per cent of all investment in the Canadian economy".
2022 Price peak On January 26, 2022, the
Bank of Canada announced their expectation that "interest rates will need to increase." The Bank of Canada began hiking interest rates on March 2, 2022, which would normally impact prices 12 to 18 months later (i.e. March- September 2023). However, Canada's average home price began to decline rapidly after peaking in February 2022, before interest rate increases, but after the announcement. The Teranet-National Bank
House Price Index peaked a few months later, in May 2022, before dropping 10%, the "largest contraction in the index ever recorded" since it began in 1999. The net worth of Canadian households (assets minus liabilities) fell by a staggering $990.1 billion in April, May and June 2022. Later that same month, Oxford Economics forecasted a 24% drop in Canadian home prices by mid-2024, unless higher interest rates and anti-speculation policies fail. Were home prices to rise further (in this latter scenario), a crash of 40% and a financial crisis was to be expected. The average and median prices for detached houses declined by almost $400,000 in the Greater Toronto Area by September 2022. Contractions in
CREA's MLS®
house price index from 2022 to January 2023 were especially pronounced in southwestern Ontario (London -26%, Cambridge -25%, Kitchener-Waterloo -25%, Brantford -24%) and southern Ontario (Hamilton -23%, the Niagara region -20%) Lance Lambert, co-founder and editor of ResiClub media and research company, attributed regional disparities in real estate markets to demand being more elastic than supply (i.e. demand changes more quickly than supply) when he noted that overheated pandemic boom markets in the US cooled faster than those that didn't increase as much in 2021. The Bank of Canada hiked the overnight interest rate 10 times between March 2022 and July 2023 bringing the target interest rate from 0.25% to 5% to combat inflation.
2023 Price bounce and peak unaffordability The IMF concluded that "Canada runs the highest risk of mortgage defaults among advanced economies" in their May 2023 report comparing 38 countries. Canada's residential housing stock was valued at 3.1 times GDP in 2023 after the average home price peaked in 2022, prices having more than doubled since 2011. By October 2023, housing sales had slowed (-17% compared to pre-pandemic) while prices stabilized. Regional disparities were noticeable with month over month
House Price Index up in more affordable markets such as Calgary (+9.4%) and Moncton (+12%), to the highest or near-highest levels on record while prices in larger, more expensive markets such as Toronto (-1.7%) and Vancouver (-0.6%) remained flat. The impact at the national level was a wash, with
HPI increasing by 1.1% year over year., requiring the median income earner to save for over 26 years for the downpayment on the median home in Toronto, or over 34 years in Vancouver.
2024 Sales drop, inventory increase Price changes were not significant compared to changes in number of sales and inventory, particularly in condo markets. The average selling price of a home in Canada decreased by 3.9% year-over-year to $724,800 in July 2024. Sales of new condo units in the first half of the year fell 57% from the previous year, marking the slowest pace in 27 years in Toronto and all housing inventory in Vancouver increased by 39% compared to the year prior, rising above the 10-year average. In October 2024, renters stayed put, with turnover at the lowest rate CMHC had tracked since data collection began in 2016.
2025 Condo crash Housing affordability continued to improve through 2025 due to house price decreases and declining interest rates. == Decline in productivity ==