Canadian Real Estate Market: Balloon or Bubble?

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I’ve been having a lot of conversations lately with clients and colleagues about the stability of the Canadian real estate market and the fear of a crash. The Canadian media has latched on to the subject and on a daily basis is pumping out sensational news stories of doom and gloom for Canadian real estate. At the same time figures and statistics from the real estate community are showing a different story, especially here in Toronto. (Check out this article from The Star, Bidding wars spark complaint from homebuyers)

In light of all this conflicting media my friends over at have created a wonderful info graphic to help you get a handle on the current market. They set out to compare Canada’s housing market today against the US’s in 2007 and outline both the market similarities as well as the fundamental differences that shield Canada from the magnitude of the housing crash that occurred in the American market.

Enjoy and I encourage you to comment below and leave your opinions on the subject. Are we going to experience continuous growth, decline or flatline?

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Christopher is a second-generation mortgage broker. Following in his dad’s steps, he helps borrowers demystify mortgage financing. Christopher lives in Toronto and when he is not in the office you’ll find him sailing on Lake Ontario.
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4 Comments Post a comment
  1. Apr 2 2012

    Absolutely wonderful Post! The CMHC seminar I attended last week talked about the 0.38% delinquency in the mortgage portfolio. Such a small ratio.

    The other fact I never see discussed is the 1% vacancy factor in Toronto. While condos may indeed be in oversupply in 2014 or 2015 that market segment will balance itself out.

    Detached home in all neigbourhoods are selling briskly when listed.

    David Pylyp
    Living in Toronto

  2. steve
    Apr 3 2012

    While I agree that we have not let our lending standards get as lax as the US, which this infographic illustrates nicely, I think this that is beside the point. The US ended up with super crappy lending standards because it started out with crappy standards to begin with. The amount our banks relaxed their credit was roughly in line, thus creating the conditions for a bubble.

    I can currently rent a nice condo in Toronto for less then the combination of:
    -property taxes
    -condo fees
    -interest on a new mortgage with 20% down
    on said condo.

    This means that my landlord is losing money off me and only owns the place because he assumes it will go up continuously at a rate high enough to justify the ownership. This kind of mentality on a large scale leads me to suspect we are indeed in a bubble.

  3. Lily
    Apr 9 2012

    I agree with steve. If property tax + condo fees + interest on mortgage > rent, and rent has not and is not expected to increase significantly, then landlords are hoping that appreciation will offset their monthly loss. This is a bubble mentality. However, I don’t see a ‘pin’ that will pop the bubble, so the balloon deflating theory works too.

  4. Trent Darby
    Mar 29 2013

    My feeling is that well over 50% of those condos in Toronto have been purchases by speculators. People that are putting minimum 5% down payments or people that are borrowing from their homes to in essence fund their retirement via rental income.

    This is the trap that many are falling into as the condo prices are surely going to crash, especially here in Toronto. When these home owners, whom aren’t covering their mortgages now with rental income start to get wind of the crash in the condo market, they will panic sell, driving prices severely downward.

    In effect, this is also going to put a lot of pressure on single family homes, driving those prices down.

    On top of all of this, look at all the boomers with little or no retirement income, who’s only asset are their houses. While some will try to hold on to their houses, many of them will be forced to sell, putting a glut on the market in the next 3 to 5 years.

    Therefore, we could be seeing downward prices in houses for the next 10 years easily!

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