Analysis of the Canadian Housing Bubble: REM-520 Assignment

This assignment analyzes the Canadian housing bubble, focusing on the period from 2003 to 2019. The student reviewed six news articles discussing the rise in housing prices, particularly in cities like Toronto and Vancouver, and the role of foreign investors. The analysis includes data on price increases, sales figures, and the impact of foreign buyer taxes. The assignment presents arguments from both sides, concluding that a housing bubble exists, despite some recent price drops, due to the high price levels compared to 2002-2003. The assignment highlights the concerns of economists and policymakers regarding the potential economic downturn and the impact of rising interest rates and inflation.

Running head: HOUSING BUBBLE IN CANADA
HOUSING BUBBLE IN CANADA
Name of the student
Name of the University
Author Note

1HOUSING BUBBLE IN CANADA
Executive Summary
The aim of the report is to review various newspaper articles or news stories about housing
bubble in Canada and then analyse their vision accordingly. The report also discusses the reasons
behind considering the housing bubble a fundamental concern to the policy makers,
homemakers, firms and citizens across the country.

2HOUSING BUBBLE IN CANADA
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

3HOUSING BUBBLE IN CANADA
Introduction
The country Canada has been experiencing a significant increase in the prices of real
estate since 2003. Over the entire period of 2003 to 2019, some cities of the country have
experienced steady growth in housing prices while some major cities like Toronto, Vancouver
and others have faced an overall rise of property and housing prices of up to 337% (Walks 2014).
The experts believed that the foreign investors mainly drive the housing price inflation. Viewing
this condition, several renowned economists have raised alarms about a possible housing bubble
in Canada. The entire report deals with the justification of the above statements.
Discussion
It was announced by the Real Estate Board (REB) of Greater Vancouver that the house
sales fell almost by 26% in August, 2019 as compared to the month of August 2015 but the
prices were still going up. The benchmark price for all types of housing rose by 3.14% to
$933,100 from August 2015. The board has also confirmed that the imposition of new foreign
buyer tax had a very little role in cooling down the situation (Citywidemortgage.ca 2019).
The sales of residential property reduced to 2489 in August 2016 from sales of 3362 in
August 2015. Furthermore, the sales in August 2016 fell by 22.8% in comparison to July 2016
(Russell 2019). According to the president of REB, Dan Morrison, the new foreign buyer tax
policy has reduced the foreign buying activity but created uncertainty amongst the local buyers
and sellers.
Toronto is suffering from inflated home prices over a decade. Latest study showed that an
average non-luxury house costs $873000 for which a buyer has to earn within top 10% of local
incomes (Febbraro 2019).

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VANCOUVER TORONTO
In Greater Vancouver and Toronto, home prices dropped by 0.5% and 0.3% respectively
in June 2019 from May 2019. The National Bank House Price Index (NBHPI) released on 22nd
July 2019 shows a decline for consecutive 11 months. For Vancouver, the index is down by
5.2% from its peak as in July 2018 but for Toronto, the index is down only by 2.1% from its
peak as in July 2017 (Richter 2019). The two graphs showing the House Price Index is attached
below.
Figure 1: House Price Index (HPI)
Source: (Richter 2019)
The above graph of Vancouver represents that from January 2002 to the peak on July
2018, the HPI skyrocketed 316%, which implies that the price was beyond quadrupled. The
graph of Toronto shows that from January 2002 to the peak on July 2017, HPI increased abruptly
beyond 218%.

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Conclusion
From the entire analysis done above, after reviewing 6 articles, it can be concluded that
even though it is said in the last paragraph that the home price has been dropped for the two
major cities of Canada but the graphical representation ascertains that housing bubble exists in
Canada. This is because even though HPI falls in year 2019 but it is relatively high compare to
2002-2003. A housing bubble is a great concern for everyone in and across the country since it
leads to downturn of the economy by rising interest rate largely, thereby inflating price level and
dropping down the demand.

6HOUSING BUBBLE IN CANADA
References
Citywidemortgage.ca. (2019). City Wide Mortgage Services | Collapsing or cooling? Vancouver
real estate market data’s mixed messages. Retrieved 11 September 2019, from
https://www.citywidemortgage.ca/collapsing-or-cooling-vancouver-real-estate-market-
datas-mixed-messages/
Febbraro, J. (2019). Toronto’s Housing Bubble Predicted To Pop: Report. Retrieved 11
September 2019, from https://torontostoreys.com/2019/07/toronto-housing-bubble-pop/
Richter, W. (2019). Canada’s Most Splendid Housing Bubbles, June Update. [online] Wolf
Street. Available at: https://wolfstreet.com/2019/07/22/canada-most-splendid-house-
price-bubbles-june-update/
Richter, W. (2019). The Most Splendid Housing Bubbles in Canada, May Update. [online] Wolf
Street. Available at: https://wolfstreet.com/2019/06/19/the-most-splendid-housing-
bubbles-in-canada-may-update/
Russell, A. (2019). Is B.C.’s foreign buyers tax cooling Vancouver’s housing market? Too early
to tell, say experts. Retrieved 11 September 2019, from
https://globalnews.ca/news/2918693/is-b-c-s-foreign-buyers-tax-cooling-vancouvers-
housing-market-too-early-to-tell-say-experts/
Walks, A. (2014). C anada's Housing Bubble Story: Mortgage Securitization, the State, and the
Global Financial Crisis.International Journal of Urban and Regional Research, 38(1),
256-284.