New data from the world’s largest central bank has unleashed startling revelations about the jaw-dropping extremities of Canada’s real estate bubble. The US Federal Reserve Bank of Dallas, housing bubble experts, recently released its Q3 2023 update on global home prices, painting a surreal picture of Canada’s property market that stands unparalleled among G7 nations.
Canada’s Bubble vs. G7 Peers
While most G7 countries experienced a rise in real estate prices following 2020 rate cuts, none quite compare to the spectacular trajectory witnessed in Canada. Zooming out on the data reveals that Canada’s real estate bubble not only puts the peaks seen in the US and Japanese bubbles to shame but stands in a league of its own, predating its recent population boom narrative.
Exaggerated Concerns Over Correction
Despite media speculation about a potential correction in Canada’s housing market, the data tells a different story. Yes, there was a peak in Q1 2022, where home prices had risen an astonishing 59% since Q1 2020. Subsequently, there was a 16.1% decline over the following year before regaining some ground. In the latest quarter, prices remain 11.4% lower than the peak, which, when viewed in the broader context, may not be as dire as some fear.
Canada Trumps the US Bubble
Comparing Canada’s real estate bubble to the United States is almost like pitting a giant against a David. The US, with its history of a real estate bubble that shook the global financial system, has seen a climb of 88.1% in home prices since 2005. However, this is less than half of the staggering 206.8% gain observed in Canada, a country with a GDP equivalent to Greater New York City.
Epic Disparities Among G7 Nations
The gap between Canada and its G7 peers is nothing short of epic. After the US, the most substantial home price growth since 2005 was observed in the UK (+83.7%), Germany (+74.8%), and France (+53.7%). In contrast, Japan (+5.0%) and Italy (+0.3%) recorded more modest gains. It’s worth noting that the latter two countries experienced rapid home price growth in the ’90s, mirroring Canada’s situation today.
Policy Decisions Fueling the Bubble
Recent policy decisions in Canada, ostensibly made to support population growth, have raised eyebrows. The data suggests that these decisions might have more to do with sustaining Canada’s bubble narrative than addressing genuine demographic needs. A zoomed-out perspective serves as a stark reminder that concerns about Canada’s state-backed, speculative credit bubble existed long before these recent policy decisions.
As the world grapples with economic uncertainties, Canada’s real estate bubble remains a surreal anomaly. The data from the US Federal Reserve Bank of Dallas not only highlights the astonishing scale of Canada’s housing market but also emphasizes the need for a cautious and informed approach as the nation navigates its way through uncharted territory.
