More On Canada's Bubble

The information for this post was obtained from the Demographia web site here:

Many economists and commentators deny there is a housing bubble in Canada.  Results of a recent article published by Demographia says something quite different.
A market is considered to be in bubble territory if the median price for housing exceeds 400% of the median household income.  A market is considered to be healthy if the housing price is equal or less than 300% of household income.

Household income compared to median house price:

Toronto      520%
Montreal    490%
Winnipeg    330%
Saskatoon  440%
Saint John   280%
Victoria      790%
Vancouver  930%

From the above list, we can see that Saint John, New Brunswick is considered a healthy market.  Winnipeg is slightly overpriced, but is healthy overall.
Montreal, Toronto, Victoria and Vancouver are certainly overpriced with potential for substantial declines.

Potential declines in housing values to reach 300% "affordable levels":

Toronto      $152,600  (-42%)
Montreal    $  94,600  (-38%)
Winnipeg    $  16,800  (-9%)
Saskatoon  $  77,200  (-31%)
Saint John   $          0 - Potential increase of $12,100
Victoria      $276,300  (-62%)
Vancouver  $366,300  (-68%)

Vancouver and Victoria merit a special note.  Because they are retirement cities, household income plays a less important role in determining value compared with the savings of retired folks who choose these milder climates.  Vancouver is also a major port of entry for Asians who bring substantial assets when they immigrate and this distorts the household income indicator.  Despite these factors, there is still significant room for a correction in these two coastal cities.

The question this blogger asks is with interest rates presently at near record lows, how long can these high prices last?


  1. Isn't Miami a retirement city? And how many immigrants with money buy in Miami? What happened to Miami's real estate prices over the last 5 years?

  2. Anonymous at 5:29 makes a good point. Just because a city is popular with retirees, does not mean prices will hold up in the long term. At some point we can expect that Vancouver prices will deflate by $350,000 or more.

  3. can you post a link to the Demographia data for confirmation.

  4. Good point bermudanate.

    The link follows:

    Note that you can find Vancouver on page 21 of this pdf document.

  5. When so many retirees die (not that i want them to) the market will be flooded, avoid such citries

  6. Agreed Anonymous at 1:58pm, demographics will be a large factor in the near future with many housing markets. Several cities in British Colombia are particularly vulnerable, in my view.


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