Thursday , 19 May 2022

Canadian Residential Real Estate Prices Growing the Fastest In the G7

Saying Canadian home prices are frothy, is like saying Mozart had a little musical talentResidential real estate prices in Canada are growing at the fastest rates in the G7 and not just over the past year, but over the past 3 decades, Nothing in the G7 comes even close to this rate of price growth….

  • Real home prices were up 6.89% in Q2 2021 and are now 25.60% higher than the same quarter a year before. Both the quarterly and annual increases are the largest in the G7 by a wide margin. In fact, annual growth hasn’t been this high in…over three decades.
  • Canada’s 25.6% real annual growth in Q2 2021 towers over the paltry 9.13% peak growth the U.S. saw in 2005. One needs to go all the way back to Q4 1989 to see anything like this in the G7, when Italy squeezed out a larger gain.
  • Only five quarters in the past 46 years have printed larger annual price growth in real terms across the G7. Outside of Canada, not one of those gains has been seen after 1990. Monetary systems aren’t supposed to be this poorly managed with all of the new policy tools since the 90s. It takes an extra special effort to screw up this royally.

U.S. Home Prices Are Growing Fast, But It’s Still A Fraction Of Canada’s Rate

U.S. home prices are also making headlines for rapid price growth, but it looks tame in comparison.

  • Real home prices in the U.S. increased 3.45% in Q2 2021, and are 7.75% higher than the same quarter a year before. Even with these lofty gains at nearly the size of peak bubble growth, they’re only a third the size of Canada.

Global Real Estate Prices Are Surging, But Not Like In Canada

Global real estate prices might be surging, but no advanced economy is seeing what Canada is.

  • The average quarterly growth for the G7, excluding Canada, was a 1.25% real increase. This is just under a fifth of the size of Canadian home price grew over the same period. The U.S. and Germany are the next closest countries, with growth at half and a third of the rate, respectively.

Canadian Home Prices Are Growing 4x The Rate Of The Next G7 Country

Canadian real home price growth on an annual basis is also lofty for the G7.

  • Average annual growth for the G7, excluding Canada, was 5.48% in Q2 2021, just under a quarter the size of Canada.
  • The U.K. is in a distant second with 9.22% growth,
  • and Germany’s home prices are 8.55% higher

G7 Real Annual Home Price Growth

The inflation-adjusted annual price increase for home prices in G7 countries in Q2 2021 were as follows:

Quarter Percent
Canada 25.6
UK 9.2
Germany 8.5
US 7.8
France 4.8
Japan 2.8
Italy -0.2
Source: US Federal Reserve; Better Dwelling.

Canadian Home Prices Have Increased 139% Since 2005, 3x More Than The Next G7 Country

…Since 2005, real home prices in Canada are up 139% as of Q2 2021, and that’s at the national level. Cities like Toronto and Vancouver have seen even larger growth over this period. Smaller secondary markets around these cities have grown even faster.

  • Since 2005, Germany’s real home prices are the second-fastest in the G7 growing at 46.65% in Q2 2021. That’s about a third of the growth seen in Canada over the same period but was enough for residents of the country’s capital to vote for nationalizing the rental stock.
  • The U.S., even including the current price boom, has only increased 10.49% over the period. One would think alarms would go off with home prices growing at 13x the rate of the country’s closest trading partner. Nope, Canada’s central bank actually said they “need” the growth.

Canadian real estate is now showing a few signs of cooling, fewer sales and falling investments are two of the big ones…[but] not even a correction can fix affordability in markets like Toronto and Vancouver at this point. Add to that, Canada’s largest bank warned tightening credit should contain further growth. Buyers are now facing the opposite conditions seen at the beginning of the pandemic.

Editor’s Note:  The original post by Stephen Punwasi has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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