About 60% of the homes sold last year in and around Toronto, Vancouver, Montreal, and Ottawa were for single-family detached houses.
Canada’s real estate market is running hotter than just about anywhere else in the world.
But even after the anxiety about irrational bidding wars and fears of the bubble bursting, what’s fundamentally driving it is a worsening imbalance between supply and demand: Property buyers want large homes but increasingly can’t have them because there isn’t enough space in and around the major cities where people work.
Canada is the world’s 2nd largest country in terms of the landmass is effectively running out of space, and that has Canada on course for a reckoning. Canadian people dream of a detached home and a piece of land, which generations of Canadians have taken for granted, and which continues to entice new immigrants well, may soon be out of reach in the places where people want to live. This demand can force an expansion of the idea of home to include condos and rentals, potentially changing the way how the middle-class people in Canada do everything from raising families to saving for retirement.
Robert Hogue, an economist at Royal Bank of Canada, said, “Running out of land in Canada is a relatively recent phenomenon compared to Europe, or Japan, or other parts of the world.”
“I think that for future generations, homeownership is going to look a lot more European, for example, than it does today.”
In Canada, buying a house has long been seen as the unquestionable path to middle-class family security. Canadians on average live in some of the largest houses in the world, and post higher rates for buying a house than in the U.K., or France, or even the U.S. The Covid-19 pandemic has put an even bigger premium on backyards and extra space houses.
About 60% of the house sold last year in 18 communities in and around Toronto, Montreal, Vancouver and Ottawa were single-family detached houses. Only about ¼ of the houses sold were apartments, as per data compiled from local real estate boards by Bloomberg News.
But the properties built in these same cities and their nearby bedroom communities over the last decade the number is exactly opposite the demand as 60% of the home built are apartments and 25% are detached houses.
This mismatch in demand and supply has forced desperate bidders to vie for an increasingly constrained supply of single-family homes.
According to Dallas Fed’s data, Canada’s benchmark home prices increased almost 15%, with only Luxemburg posting a higher increase.