Canada's house prices more than doubled since 2005, outpacing most developed countries

Canadian house prices have more than doubled since 2005, rising faster than in most other developed nations, according to a new report from the Canada Mortgage and Housing Corporation. The federal housing agency released the international comparison on Tuesday. It found the core issue is that housing demand in Canada grew faster than supply for a longer period than in comparable countries. The report pins much of this imbalance on record population growth, which it says has far outpaced the construction of new homes.

"Canada's housing challenge isn't just that home prices rose. It's that demand grew faster than supply for longer than in many comparable countries," said Aled ab Iorwerth, CMHC's deputy chief economist. He said understanding this dynamic can help identify changes needed to improve affordability. The research noted that in 2023 and 2024, nearly five new residents were added for every housing completion. Other factors behind the supply-demand gap include low borrowing costs and rising incomes.

The affordability problem began in Vancouver in the early 2000s before spreading to Toronto in the early 2010s, the report said. It later extended to Ottawa, Montreal, Halifax and other major cities. While countries like Canada, Australia and Sweden saw only modest price declines during the 2008-09 global recession, they later experienced steady growth through 2022. The United States, by contrast, saw house prices plunge during that financial crisis.

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"The key difference is not what happened during the (global financial) crisis, but rather what happened afterward," the CMHC report stated. "Canada's house prices continued to grow rapidly for over a decade, eventually outpacing most peer countries." The agency said even if Canada had experienced a U.S.-style market correction, it would still have one of the world's fastest-growing house prices. It concluded the affordability challenges developed over many years and cannot be tied to a single event.

Population growth, driven in part by migration, is a major source of housing demand with a significant effect on prices, according to the study. It found that over the past two decades, countries with faster population growth generally saw stronger real house price growth. Canada, Australia, New Zealand, Norway and Sweden all followed this trend, with Canada posting the highest price growth within that group. The report said understanding these long-term drivers is essential to comprehending Canada's high house prices.

With files from BNN Bloomberg