Canada's Housing Market: A 5-10 Year Stagnation Ahead

Strategic Insights -

Canada's housing market has been stagnant for 3 1/2 years, with average home prices declining by 20% in nominal terms and 30% in real terms since 2022. This prolonged correction is on par with major housing busts in the US and Ontario, with a similar depth and duration. Robert Kavcic, a senior economist with Bank of Montreal, expects it will take at least 5-10 years for prices to recover to 2022 levels. The national average selling price has declined significantly, with Toronto and Vancouver markets experiencing the most pronounced decline due to years of intense speculation. In contrast, parts of the Prairies and Atlantic Canada are experiencing sales growth.

Key Takeaways:

  • The Canadian housing market has been declining for 3 1/2 years, with no rebound in sight.
  • Average home prices have dropped by 20% in nominal terms and 30% in real terms since 2022.
  • The national average selling price is on par with major housing busts in the US and Ontario in terms of depth and duration.
  • It will take at least 5-10 years for home prices to recover to 2022 levels.
  • Toronto and Vancouver markets have experienced the most pronounced decline due to years of intense speculation.
  • Parts of the Prairies and Atlantic Canada are experiencing sales growth.
  • Real estate accounts for over 40% of total household assets, with Canadians relying heavily on housing as a financial asset and retirement plan.
  • Half of unretired homeowners plan to rely on the sale of their home to set themselves up for retirement, while one-third of Canadians rely on their home as their only financial plan for retirement.

Statistics:

  • Average home price in Canada: $820,000 at peak (January 2022) [1]
  • Average sale price decline: 20% in nominal terms and 30% in real terms since 2022 [1]
  • National average selling price decline: on par with major housing busts in the US and Ontario [1]
  • Time to recover to previous highs: 10 years (US) and 12 years (Ontario) [1]
  • Share of real estate in total household assets: 46% (peak) and 40% (current) [2]
  • Number of Canadians relying on the sale of their home for retirement: one-third [3]
  • Number of unretired homeowners planning to rely on home sale for retirement: half [4]

Sources:

  • [1] Bank of Montreal Senior Economist, Robert Kavcic
  • [2] Statistics Canada: Household assets and liabilities, 2016 and 2020
  • [3] Re/Max report: Canadian Homeownership and Retirement Trends, 2022
  • [4] Healthcare of Ontario Pension Plan report: Financial Well-being of Canadians, June 2022