Two Charts: All You Need To Know About Canada’s Housing Bubble

First chart: Income and House prices
Second chart: Canada’s Household Debt to GDP Ratio
Study and compare.
Note cause of our bubble.
Any more questions?

[sources: First Chart from Alexandre Pestov’s ‘The Elusive Canadian Housing Bubble’, Summer 2010 edition, July 2010; Second Chart adapted from one in a letter from David Rosenberg, and previously headlined 7 May 2010]

26 responses to “Two Charts: All You Need To Know About Canada’s Housing Bubble

  1. fantastic charts! The first one is very telling.

  2. pricedoutfornow

    EXACTLY. There is nothing else to say.

  3. Too bad that someone hasn’t made a chart like this except for housing, substitute vehicles. I would love to see that one. Who can remember when if you saw a new BMW, Merecedes, or Cadilac, you thought wow someone must be doing good for themselves. Today it is a very different story. Those cars are everywhere. Complete status symbols and credited out the wazzoo. World of hurt coming to this country.

    I can give this example. GF’s friend’s son (24) went out and bought himself a new truck. to me its just transportation. nothing I would personaly shell out $56,000.00 for. to him it was as long as I can make the payments. Then he said, “this has always been my dream truck” I went on line to look up this new version truck, it has only been out for 2 years. dream truck???

    kids today… ouch. dang talking about dream things, I want a 68 Shelby, but that doesn’t mean I am willing to go into hock $150K for one.

    • Condescending much?

      First off, just because you dont appreciate car/trucks for more than just transportation doesnt mean everyone who finds joy in owning a nice one is crazy. Think of all the things you like. Maybe its a really nice TV, nice bed, nice couch, nice clothes, good food… the list goes on. For all of those things you could say “its just a ____, it does _____ who cares?”

      I would love to own a nice car one day, and much like the guy you mention, I’m in my early 20’s. I have no problem shelling out 50K for a BMW M3 or a 370Z. The joy I would get from it would be worth it. I know pretty much all cars just get you from A to B, but I would like to do it in a nice car. For that I am willing to sacrafice other things in my life like owning my own place or even renting on my own (I have a roommate now).

      Unlike the guy you know I could buy one for cash right now, but I really have no need for a car right now since I get to use a truck from work when I’m working, and I live right by the skytrain so going to see my friends or heading downtown doesnt require a car anyway.

      “kids today… ouch. dang talking about dream things, I want a 68 Shelby”

      So because your dream car is old that makes it ok to be a dream car? Off the high horse please.

      • Northern_dirt

        And this is exactly why young people are broke and in debt nowadays.
        (Me included) This entitlement that credit has created is scary, Im still in debt, should be clear in a year then its all about saving and investing. A $50,000 car can wait, It wont be able to feed me when I retire.

      • as most cocksure youth you simply are not listening – re-read the charts then re-read the post and meditate on that for a minute before you frivolously spend your entire savings on a rapidly depreciating asset

  4. Davers, you said, ‘ I know pretty much all cars just get you from A to B, but I would like to do it in a nice car. For that I am willing to sacrafice other things in my life like owning my own place.’

    Interesting. This is exactly how alot of the FTB’s are in Vancouver. They would justify owning despite knowing that all houses just put a roof over your head and yet they would rather overpay for the right to own than to rent a similar unit for much less. I guess it’s all about individual preferences.

  5. davers, you completely missed the point and highlighted exactly what is wrong with today’s youth.

    You admit you see nothing wrong with being in your early 20s and buying a $56K vehicle. Unless you’re making double that, there is something very wrong with it. Instead of saving early for a house, retirement, … you’re going to blow $1K/mn on a vehicle and then pay out your @$$ for insurance.

    Let me put it in other terms. If you’re a lucky early 20yo and making $60K you’re taking home $5K/mn, or $3.8K/mn after tax. You’re spending 26% financing a $56K vehicle for 5 years, and that doesn’t include the high costs of insurance or maintenance.

    So lets just round up and say 1/3 of your after tax income will be wasted on a vehicle. That’s more than most responsible families pay for housing.

    I was 23yo once, and bought a $41K Mercedes, so I understand the desire. Looking back I also see the stupidity of my decision. Maybe one day you will too. I hope that day comes before you turn 30yo and join the growing number of 30yos with no savings, no retirement savings, $Ks of LOC/CC debt, and spending habits that ensure they’ll never dig themselves out of that hole.

    • @Northern_dirt

      Buying a $50K car wouldnt put me in debt. I have that in the bank right now because I actually save my money. I am not in the norm for a 20 something, and I wouldnt recommend someone financing a car that expensive just because they want it.


      What exactly dont I understand? Debt is bad and housing will crash? I got that. BTW 50K is about half of my savings. I figure if I am gunna do something fun and stupid with it (I know buying an expensive car is not the smartest way to spend 50K) then I mid as well do it while I’m young. Before too long I might have a wife and kids so I want to have some fun wasting cash before I have more important things to spend it on.


      You missed what I said. I have the money to buy a nice car for cash. I would never finance anything other than real estate. If I cant save up enough money to buy something then I probably dont want it that bad.

      Your numbers on my earnings are pretty damn close actually. I am very lucky to be where I am right now but such is the benifit of enjoying working in an industry that pays well. I take home about $3500 a month and spend $600 on rent. $500 gets taken out every month to a retirement account that I dont touch. If I keep it up and the market makes something like 6% a year I will have more than enough money to retire. Other than that I just spend money on things that make me happy, dinner out with friends, vacations, and someday, a nice car.

      So before everyone jumps all over me and “todays youth” in general, maybe stop to consider that some of us are actually responsible.


      Tell me about it! I even stated I could buy a nice car for cash and everyong STILL assumes I would get financing.

  6. I’m 50 years old and have never had a car or motorcycle loan in my life.
    If I didn’t have the cash I didn’t buy it. Simple as that.
    Luckily I’ve almost always had a pretty good income so I’ve bought a few nice cars over the years.
    Bought a 1976 Vette in 1979.
    Driving a 2005 911 right now, bought in 2007.
    Many kids today want it all and want it now.
    When I brought home a new 97 Grand Cherokee a younger neighbour asked What are the payments? I said, One payment 38 grand.
    He says, No, come one, I’m serious what are the payments?
    I repeated myself.
    He looked completely stunned. It seemed like it never had occurred to him that someone would buy a new car and not make payments.
    Many people are about to learn that debt is not your friend, whether it is a car or a home and it will be a hard lesson for many.

  7. It seemed like it never had occurred to him that someone would buy a new car and not make payments.

    That’s in part because most people want a new car every few years, so they lease it, instead of buying it, which really only makes sense if you have a business and can write it off.

    For most people, it seems:

    1. A house is a good investment, ALWAYS.
    2. A car is something you replace every three or four years.

    Dunno, but I perceive a house as a home and a car as a tool and I live in the first for as long as I want / need / can and the second I use until it makes more financial sense to replace it.

    Having said that. I did buy a 40 year old Mercedes and am rebuilding it, just for fun, but once I am done I’ve still paid less than on a new car and it will actually have appreciated in value.

  8. What about population growth?

    • Bill->
      Good point to raise. If we had seen a great acceleration of population growth since 2000, the price rises may be argued to be justified based on that demand. However population growth has been pedestrian through these years
      See here for chart.
      [from Sauder pdf]

  9. I just tossed that automobile comparing houses as a side line to the graph and I didn’t expect the comments. However, with that said, very good comments drawing the two items into perspective. Houses and autos…

    Davers, I am not on any high horse, if you took offence to the truth of the matter maybe it shows the world of pain that is coming to the youth of this country. As many comments did counter your insights.

  10. I just came across this website and found this topic interesting. How times have changed. I am 48 and have watched how things have went. I remember back in the early 90’s wondering how people do it, new house new cars and all the while I was struggling to keep my old truck running and pay the rent. Oh btw I am self employed so back then credit was not easy like it is now. Afew years ago my b/f and I where going to buy a house, as a self employed person I wondered how this would go. Well within 2 mins we where approved for a 300k mortage, LOL. She flubbed my income so we could, no such thing as a subprime in Canada, same shit different pile.

    I backed out as my income is so iffy and having lived through the 80’s I had learned that being extremely broke is no fun at all. I find that alot of the younger generation have no fear of this, or no what its like to eat plain noodles for supper cuz thats all there was. No credit cards to go and buy some food or pay the rent. I went through alot of winters like that, then things changed, soon there was work all winter which to this day winters make me nervous.

    I do feel that the new car thing is just as KC said a somewhat of a status symbol, and the government hasn’t helped with aircare (to get the older affordable vehicles of the road) and handing out loans to people who really can’t afford it. I can forsee the future being abit bleak for alot of the younger people. Me well yes i have a credit card, and a credit score that is considered in the good range, but still nervous to dive into huge debt to drive a new car that if something happens and I can’t make the payments, it gets repossessed then I’m walking with no credit LOL.

    2 cents worth thanks for reading

  11. KC,

    Yeah, I took offence to what you said.

    I always wonder when an older generation will stop being so critical of a younger generation for making the same mistakes everyone makes. Everyone does dumb things when they are young and they learn from them. And then when they get older they seem to forget the things they did when they were younger, and say the younger generation is some sort of lost cause.

    See my response to taylor and let me know if you still think I’m being irresponsible.

  12. Davers, I read what you had said, you are a rare one who is in a boat all to your own. Hat tip to ya. However, if you were to turn the clock back to the 80’s and the 90’s you will see that there is a major shift in attitudes in how people are accepting the world as the “new normal” years back credit was a thing to avoid at all costs. you bought a home and got a mortgage. end of story. You paid that sucker off as fast as you could for the NORMAL 20 years. while banking 10-15% of your pay cheque for that rainy day.

    Look at how today’s normal is seen… there are these radio plugs that tell you that if you own a home you are sucessful. “let your home lend a hand” no where in those plugs do they tell you that actually you are in debt up to your eyeballs and we want to give you more debt. Somewhere today networth is twisted into how much you owe, this is the “new normal” your net worth is actually what is left in your pocket after you sell everything you own then pay off ALL your debts. If someone leases a (or gets a loan) for 50K for a new ride, you think it is still going to fetch 50K in sale? nope your *net worth* just took a hit of 5-10%. The majority of people do not understand this, nor do they want to even hear the truth. Same thing applies with housing. or…. fill in the blank.

    you are very correct in saying young do dumb things, however, some of us old farts were actualy taught the proper way to avoid doing dumb things. I am going to go out on a limb here and guess your grandparents never lived thru the 30’s, and that you have never heard the stories of how life was like. When you grow up hearing about hardship from the ones who lived it, that is a life lesson that should never be shrugged off. I am not on any high horse nor do I feel that the others on this thread who commented about the way it is and the way it is going to be for some being placed on a high horse either; they are just laying it on the line. Try and get some of your mid 20’s friends to read this thread and see what they have to say about what has been said. sometimes the bigger the headache the larger the pill. And one other thing, I like cars, however, there is a difference in a dream car that you can always say ” one day if I win the 6-49 i will buy” knowing damn well it is a dream for something you don’t need and would love to have. and there is a difference in calling something a dream and then not knowing the difference of what actually consists of a dream and reality. Dream is just that, reality is that $1500/ month payment for that instant gratifacation.

  13. I think the problem is three fold-
    The younger generation buying into the concept of ” its different here – it wont happen in Canada – we are different than the US”. Those of us who are older remember it does happen here – early 80’s wasnt it ?
    Mortgage rates at levels that make money just about “free”. When your view is that “I can make the payments” rather than worrying about the principle… . can cause future problems when interest rates rise. Is anyone else tired about hearing housing is becoming more unaffordable because interest rates have crept up .5 of a percent or HST has come into play ? What about the 30-40 % over inflated price tag ? Does that not effect the unaffordability ?
    This leads to my final rant – When are we going to get balanced media attention to this issue ? We always get real estate types in the media hyping the latest stats, preaching this is the time to buy – its a buyers market now…
    We need to have some economics people on main stream media explaining the first chart – prices have gotten ahead of themselves. 95% of the population gain from realistic housing prices – unfortunately some pain will be experienced getting there. But it will happen – facts point that it HAS TO.

  14. KC

    Well, my grandparents did live through the 30s, my grandma is turning 90 this year. I am fully aware that things can go wrong. My dad is also an accountant, so I know the importance of saving money. I am very careful with my money. How else do you think I saved 100K+ at the age of 23? I also have more money in a retirement fund now than most 30 somethings do. Granted, I got lucky. A 2 year course at BCIT straight out of highschool was something I really enjoyed and excelled at. Then straight out of there I got a job starting at 50K/year which is now 60K/year since my training is complete.

    I know full well that whatever car I end up buying will lose its value quickly. Thats actually half the reason I want to buy it in the first place. You can get a 4 year old car that cost 150K new for 60K now. Sure, the warrenty is about up and it wont be a cheap thing to maintain, but I am prepared for that because I currently have $1000+ left over every month that I just stick into savings or mutual funds. The fact is I currently live well below my means and am looking to have a little fun to reward myself.

    Again, I am not a normal 23 year old. I agree with what you are saying in a broader sense about people living beyond their means, but I took a bit of offence when everyone assumed I would be to the gills in debt when I even stated I could get a nice car without a loan.

  15. give em’ hell, Davers.
    I’m an “old fogey” myself, but I don’t see any flaws in your logic – and as far as all this “youth of today” BS goes – quite frankly the smart ones and the lucky ones are pulling rabbits out of a hat, and working magic and miracles with sweet F*** all going for them.
    I graduated with a lame degree and waltzed into swell working conditions that we may never see again in our lifetimes…you and your peers don’t have those options (and those that did have no business yapping about “youth of today” – offering all the usual platitudes.)
    We should consider ourselves lucky that the “youth of today” aren’t burning our cities down around our ears.

  16. The other chart that this post needs is one the shows interest rates. Money is practically free right now. My husband and I have a very large line of credit – we spend more each month than we earn and finance it through our line of credit. We have no assets (unless you count our 2003 station wagon – which we purchased second-hand with a loan of money from my father). We are OK with this situation as my husband is completing his studies and will be working full time in the near future – that’s when we hope to start paying down debt. Everyone is used to buying whatever they want, when they want it right now, as it costs so little to borrow. IF interest rates go up, that will be a different story – but rates have been so low, for so long, its hard for anyone to imagine what that will be like.

  17. How true Renter in Bby – the interest rates are lower than they have been in my life time (57years). Imagine what would happen to you and to countless others with high debt or even low debt coupled with low income. We have become a society dependant on the money of others. In 1981 there was a huge housing crash in Vancouver and this was fuelled by a steep rise in interest rates…one of my payments was at 21%. Lots of foreclosures turned banks from lenders to Real Estate owners…I am not sold that it would be an advantage for the Banks to have to repeat that scenario.
    Yes, an interest chart goint back 40 years would be interesting to take a peek at. My parents purchased a home in 1958 in Burnaby for 15,000 at an interest rate of 7%. As house prices have risen and interest rates fallen and even interest only packages are offered, it is infact for some less costly to make a mortgage or interest payment than it was even in the early 21st century.

  18. wow those charts pretty much say it all as why the market kind of crashed

    • Things are so desperate in the US that Californian realtors are leaving non sequitur comments, such as the one above, on Canadian blogs in the hope of drumming up some business.
      We’ll leave the spam up in this case, just for the record.
      The irony is that purchasing RE in some parts of California today is likely far safer than buying in BC.

  19. “A house is a good investment, ALWAYS”

    That is quite a statement…one that I might have agreed with 5 years ago. now sitting here in Ontario with a home that should sell for 310,00…and reality is that I will be happy to get off my position for 280, I’m not so sure. I paid 275 in 08), I made a big mistake after selling in Calgary moving to Barrie and buying…should have rented first – checked lay of land and made a decision after a year. Well, hindsight is indeed 20/20. Im now going back to Calgary…& seeing as i do believe that said bubble is over, we will rent and see what happens. I do not see the smarts in buying an asset with the banks money that may well depreciate…a double whammy.

    as for REal hard times…that is entirely possible. Anyone that believes the BS from MSM about how things are getting better are simply out of touch with reality. The US, Europe, Japan are all in Deep Deep shit…in my opinion, there is no solution/result other than monetary collapse. 2012 maybe, who knows..?? Godl and silver may not be such a bad thing to have in ones possession methinks.!! A Generator /survivor gear and a cpl of nice big dogs too.!

    its a lovely world we live in boys n girls

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