Jury is still out on Canada's Housing Bubble


Some think the Canadian housing market is in a bubble of epic proportions, while others believe it’s just a simple case where demand has outpaced supply, both in big and small cities.

But there’s no doubt that the rapid escalation of housing prices during a pandemic-induced recession is fuelling debate about what’s behind the surge and whether regulators can or should do something about it.

After a drastic drop in residential sales activity in April 2020, housing markets rebounded, with each successive month posting new sales records. Price increases soon followed. At the same time, the number of new listings was lower than home sales, resulting in more buyers competing for fewer properties.

Housing prices rose so fast during the downturn that they have surprised many industry observers. A quality- and size-adjusted housing price index produced by the Canadian Real Estate Association (CREA) showed that prices in February were up by 17 per cent year over year in large urban markets.

In Moncton, N.B., prices were up by 28 per cent. Prices escalated even faster in suburbs on the periphery of large cities, such as Barrie, Ont. (north of Toronto), where the increase was 34 per cent.

Much of the demand for housing has to do with ultra-low mortgage rates, which lower the monthly cost of ownership, and the nature of the pandemic-induced recession. White-collar, knowledge-economy workers, who are more likely to own a house, have largely been spared by the downturn, while those in sectors such as hospitality, travel and tourism — who are more likely to rent — have disproportionately suffered layoffs and financial hardship.

Teleworkers generated demand for larger homes at the expense of housing in the urban core. Prices, therefore, rose faster in the suburbs and beyond compared to the centre. But this is where conventional wisdom ends.

Tsuriel Somerville, a professor of urban economics at the University of British Columbia in Vancouver, points out some ignored demographic undercurrents that may partially explain the real estate puzzle. COVID-19, he believes, might have accelerated some transactions that would have happened regardless, but over a more extended period.

Somerville said the oft-repeated argument that millennials are not keen on buying and are content with renting and living in a sharing economy has its limits. Eventually, millennials will get into the ownership market when their demographics dictate.

COVID-19 is likely the catalyst that hastened the transition to owning for some and encouraged others to move to a larger dwelling.

But as demand rapidly increased, supply lagged, at least in the resale market. Unlike buyers, sellers may not be motivated to plan both a sale and a subsequent move in the middle of a pandemic, Somerville said.

Sellers often stay on the sidelines when prices rapidly rise, waiting for the market to peak before they list, further constricting supply and contributing to price escalation.

That prices have considerably risen is not in dispute. Whether it is a bubble is a matter of debate. David Rosenberg, president of Rosenberg Research & Associates Inc., is not one to mince words and he believes that we are witnessing a housing bubble of epic proportions.

Rosenberg looks at more than just prices to also focus on the supply side, especially the construction of new housing, which he said is at an all-time high. Residential construction in Canada accounted for 9.3 per cent of GDP in 2020, 55 per cent higher than the long-run average value of six per cent. In the United States, by comparison, residential construction accounted for just 4.6 per cent of GDP, he noted.

Douglas Porter, chief economist and managing director of BMO Financial Group, wonders whether Canada will ever build enough housing to meet the insatiable desire for homeownership. If people believe housing prices only move in one direction, demand might remain high.

However, he believes that given the recessionary tardiness, the economy will welcome growth in any sector it can find, even if it’s in residential property. He said monetary policy cannot do much in the short run to address housing prices.

Calls for the government to address rapidly escalating housing prices are rising, but one should be cautious before advocating for the blunt use of macroprudential instruments. Should the federal government or one of its agencies intervene with a tool that is indiscriminately applied to all of Canada, much like the mortgage stress test, there could be unintended consequences.

CREA’s latest release reveals that the escalation in housing prices is far more pronounced in Ontario than in other provinces. Year-over-year price increases were four per cent in Calgary, 6.9 per cent in Vancouver and 18.4 per cent in Montreal.

In general, prices in the East have heated up far more than elsewhere, which suggests that should regulators be tempted to act, provincial and local governments might be better placed to devise interventions, such as a land transfer tax, sensitive to their local market circumstances.

A one-size-fits-all housing remedy might further hurt struggling markets in Alberta and Saskatchewan, where current housing prices are below their highs recorded five years ago. Murtaza Haider is a professor at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website hmbulletin.com.

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A disturbing trend I've come across recently is the fraud in the rental space.   As an agent who handles a fair share of rentals; these issues have shown up over several ways this year.   I'll tell you about 3 instances I've had and the red flags that appeared with each! 

When I'm representing a landlord and an application comes in, I spend a lot of time going through an applicants documentation and getting references and looking through their background.  Here's what I do:

  • Call their employer by finding the employer's website and calling through their office to confirm employment.  I don't just call the supervisor on the application
  • Look carefully at the documents to see if they are real; company letterhead & credit reports can be faked or bought
  • Check social media & linked in
  • Call past landlords
  • Make sure there is a building at the address they're currently renting
  • Check that the landlords name and property owners names match.   If it's an apartment building call through the property management company if it's an apartment rather than calling the number provided.
  • Look at the credit report for signs of altering

With those things in mind, let's look at 3 things that have happened to me this year!

1.  Student rental Scam - fake rental and landlord

First of all, you should never have to pay to submit a rental application, or be asked for a deposit before you get a chance to see the place.   These scams are generally ads on sites like Kijijii and Facebook for rentals that look too good to be true.  They also steal MLS listings for homes and advertise them at lower rates.  I came across one recently through a family friend desperate for some student housing.  It was a big scam; and when I called them out they 'protested too much'.    Here's how to spot these scammers:

  • They demand payment to submit a rental application
  • They demand a deposit before you see the unit
  • Makes excuses why they are not available to speak to on the phone 
  • Will only communicate through messenger, text or email
  • The advertised price is way lower than other rentals
  • Their Facebook profile was just created
  • Their Facebook name does not match their user name ID (see the URL) 

2. Fake Rental Applications   

There are some very good forged documents out there.  I had some people submit an application on a lease I was advertising and here's what I found during the checks, among the other checks I did as above :

  • Inconsistencies in addresses on the application
  • Employment letter does not look real - no header or footer with information on the company letterhead

3. Forged Tenacy Papers

I had a call from a gal who had a great story, good employment, good credit, moving to Toronto from outside the city for work, can't come in to look for a place so needed virtual showings.  Could I help her find a place.  Sounds great right?  

Now I don't usually check tenants out before I help them (and I'd helped out a client with an out of town move this year already in a similar situation)  But with everything going on right now, I felt it couldn't hurt to see what her references would say.   So she sent in her application & 

then came the paperwork - the address of her job didn't match up with her story.  The company had never heard of her or her supervisor.  There was even no property listed at the home she had put for her address!  Other red flags for scammers include what she did:

  • get overly upset when called out 
  • provide complicated excuses for 'mistakes' on application forms
  • call the fact checker a liar, unprofessional, etc.

So be careful out there folks! 


A big thank you to the communities of Guildwood, West Rouge & Port Union for the terrific support last Saturday for my Community Shredding Event.  About 30 families participated - and their generous food donations filled our Jeep to the brim!   The food donations were taken straight to Feed Scarborough - the Scarborough Food Security initiative and will be distributed to local satellite food banks in the area.   Judging from the huge line up outside the Manse Rd. food bank Saturday, it's much needed. 

Chartwell Guildwood was my partner for this event and provided the venue and great snacks.  Thank you Kelly & Dianne for your wonderful support.  As always, Papersavers was gracious, friendly, professional and helpful!  

One interesting sideline - My husband, myself, Dianne and Alex from papersavers all grew up within the same area!   Such a big city/small world!