Canada, especially Greater Toronto Area (GTA), has a lack of housing supply! No matter where land for the first time as immigrants or live in general, they want to settle down in GTA since Toronto is the financial capital of Canada and there are more job and enterprenual opportunities than other places in Canada. According to Financial Post, “Among the G7m Canada has the lowest average housing supply per capita with 424 units per 1,000 people, which places the country behind the United States and the United Kingdom. France, by comparison, leades the G7 at 540 units per 1,000. The pandemic, which allowed households to accrue record savings and saw unprecedented stimulus measure, stoked the country’s hot housing market and has pushed it into frothy territory over the past two years”. CMHC warned back in 2022 that Canada will need 5.8 million new homes by 2030 to tackle affordability crisis (CBC News). Yes, they like to build more houses, however, there is a complex time-consuming approval process. According to Amborki, it can take eight to ten years to go from acqiring undeveloped land to building houses. Most importantly, it is very hard to get land in or close to Toronto area.

Canadian government has done something for the housing affordability. And, it has recently (from April 1, 2023) announced First Home Saving Account (FHSA) and it is a registered plan allowing you, as a prospective first-time home buyer, to save for your first home tax-free (up to certain limits). And, it has prohibited on the purchase of residential property by non-Canadians Act. And, it has initiated a vacancy tax at federal, provincial and municipal in some cases. No matter what the government is doine, it shows that it is easier said than done.

Experts say that Canada is sitting on the larguest housing bubble ever! And they believe that bursting of the bubble is inevitable. Even is the economic crisis in US in 2008, Canadian housing market did not crash. It only went to -9.2% low and it recovered quickly. They say that Canadian housing market has not seen that correction yet. After the recession in 2008 the banks around the world lowered the interest rates to very low as a result, it became very easy to get a mortgage and buy a house until 2022.

As a result, many investors took that money and invested in the real estate because the investment in the real estate had a track record of generating income from the investment. As a result, on the one hand there are houses that belong to investors that are empty, on the other hand there not enough houses for other people to live. As a result, when those people who do not have homes want to buy one, there are not enough homes available in the market. Property prices in the market are skyrocket, when so many people want to buy a property. Rapidly rising prices of assets lead to volatile prices. As a result, a huge bubble has been created for a long time and especially after covid-19! Experts say Canada is living in the biggest housing bubble ever! And they believe that the bursting of the bubble is inevitable. (My next post will be in interest rate and housing bubble!)