Canada house prices, trends and housing market analysis

Housing news in Canada 2022

Canadian house prices averted a crash thanks to the pandemic, where people spent their money on homes as opposed to shopping and travel. Overall, a 28% rise in home prices means that the market is somewhat overheated with extreme overvaluations. However the pro-China policies of Justin Trudeau, his harsh crackdown on protestors and the collapse of civil liberties in Canada means that the market will be more attractive to Chinese investors and attract less migration from other developed nations where people value freedom and liberty.

According to the OECD, Canada has the second most overvalued property market in the world, just after the Netherlands. It is thus ripe for a steep decline unless inflation continue to move at it’s current pace.

Housing sales and prices

Analyst views: House prices in Canada are forecast to rise around 1.1 percent this year and  1.9 percent in 2020, increasing to 3 percent in 2021. Yet this is somewhat subdued considered recent price rises and inflation.

The Canadian housing market seems to be braking as policy makers seek to avoid a collision. The boom experienced in Toronto and Vancouver since 2009, only a year after the debt and housing crisis, has caused property values to more than double and in order to reduce the risks, in what is considered to be the economy’s chief vulnerability, the government increased interest rates and brought in tougher regulations.

After an eight year climb, with the national average increase in home prices at 80%, the market started slowing down since mid 2017.The Canadian Real Estate Association reported a drop in transactions by 1.6% in September 2018, with a further decline in October. Montreal experienced a 2.9% decline and Toronto by 1.1%. The annual drop in home sales across Canada was 3.7% while the average home price fell 1.5%.

Canada was ranked as the third riskiest housing market in the world according to a global study by researchers at Oxford Economics and that prices were overvalued at 173% higher than their historical average. The country could face a dramatic price correction sending tremors into the economy.


Contributing factors

The Canadian real estate market is affected by various contributing factors which lead either upward or downward spirals.

The Bank of Canada controls the interest rates, one of the biggest determining factors. The low interest offered by lenders since 2008 pushed up the demand for mortgages, which is probably the main reason for the booming housing market seen in Toronto and other cities.  Canada might have escaped the post- 2008 collapse seen in Europe and the U.S. but this situation might prove difficult. This was one of the measures taken by the Canadian government to support the market after the recession of the 90s. These and other monetary policies are used to ensure a manageable demand.

Demand is fueled by demographics and immigrants and young people need homes, while baby boomers are reluctant to give up theirs. High population growth rates have continued for two decades while new arrivals in cities lead to a higher demand. Statistics show that 75,000 people move to Toronto every year.

Consumer spending, the driving force behind the Canadian economy for several years now is set to subside due to a combination of weaker employment and wage growth, consumer debt and rising interest rates.

The economy is projected to grow by 1.9% in 2019, lower than the 2.1% of the previous year. Energy investment will remain weak and oil exports will decline. Business is expected to grow modestly.

Rental yields

Canada offers reasonable returns on investment in this era of low returns. Montreal yields the highest rental returns which outpace those of Toronto. Smaller apartments in Montreal will give a gross rental return of 6%, while a 120 square meter apartment will give a return of 4.5%. The returns in Toronto are lower and are estimated to be at 2% net. These figures have not been updated recently and might differ slightly now.

Canada has strong tenant protection laws. All the provinces, except for Quebec, allow free rent negotiation. In Quebec, negotiated rents can be appealed if they are higher than that charged by the landlord for the same property within the previous 12 months.

The landlord cannot terminate a contract of a fixed- term lease, except in the event of non-payment of rent, illegal activities by the tenant and other serious causes. Rental leases are usually signed gor one year.

Subleasing is allowed if the landlord gives permission and he has the right to screen and reject prospective tenants if he deems they are a financial risk.

Taxes and costs

Taxes are generally high in Canada and gross rental income is taxed at 25%. This is withheld by the tenant.

Foreigners rarely have difficulties in purchasing properties as there are virtually no restrictions in Canada. Non residents can elect to pay tax under section 216 of the Income Tax Act, where they are liable to pay on their net income at progressive federal rates. If they elect to do so they are liable to pay 48% surtax.

Capital gains are paid on only 50% of the amount gained, while they are calculated by deducting the costs incurred in selling and purchasing the property, capital expenditures and costs of additions or improvements.

Canada has no inheritance or estate tax. Residents are subject to Canadian tax on their worldwide income at the federal and provincial level.

Transaction costs, including taxes for buying properties are usually low and range from 4.7% to 11%. Taxes differ in each province, ranging from 0.5% to 2%. Total costs are higher for new and renovated houses because of the additional 6% GST.


Canada has a relatively low unemployment rate at 5.6% in December 2018. This remains the lowest rate since data became available in 1976. The figures vary from state to state and Newfoundland and Labrador have the highest rates. Canada’s annual inflation rate for 2018 was at 1.7%.

There has been increased government spending on infrastructure while child benefits have also been raised. Some tax cuts were recently implemented. This has led to a sharp rise in Canada’s deficit.

All signs show that even though oil exports will decrease because of the weakening oil prices and pipeline capacity constraints, Canada’s energy sector will increase as will exports of other products.  Wage growth is weak but there are signs that 2019 might be slightly better as firms compete for a limited amount of workers.

Canada relaxed its immigration laws in 2015 and took in 321,000 immigrants in the 2015-16 fiscal years. The following year they admitted 300,000 more with a further million to be admitted between 2018 and 2020. This is to fill in the gap left by retiring baby boomers.

Besides contributing to the Canadian economy with their skills, these immigrants will help boost the housing market.