Why Canadian Home Prices Have Risen Faster Than Most Countries — And What Needs to Change

Canada’s housing affordability crisis didn’t happen overnight. New international research reveals how population growth, housing supply and decades of sustained price increases have combined to make homeownership increasingly challenging for Canadians.

Canada’s Housing Market: How Did We Get Here?

Housing affordability has become one of Canada’s most significant economic challenges. For many buyers, particularly first-time buyers and younger households, entering the market has become increasingly difficult. But how did Canada reach this point, and why have our home prices risen faster than those in so many other developed countries?

International housing research comparing Canada with other developed economies offers some important answers. Since 2005, Canadian home prices, adjusted for inflation, have more than doubled. That growth has outpaced most comparable countries, suggesting that Canada’s affordability challenges are not simply the result of a global housing trend.

Instead, the research points to a combination of strong population growth, rising incomes, historically low borrowing costs and housing construction that has struggled to keep pace with increasing demand.

1. Population Growth Has Put Significant Pressure on Housing

Population growth is one of the most important factors influencing housing demand. As more people move to Canada, the need for homes increases, whether through renting, purchasing a first property or moving into a larger home.

Between 2023 and 2024, Canada added nearly five new residents for every completed home, according to the research. This illustrates the scale of the challenge: even when construction increases, the number of new homes may not be sufficient to accommodate a rapidly growing population.

The relationship between population growth and housing prices is not unique to Canada. Countries such as Australia, New Zealand, Norway and Sweden have also experienced population growth alongside rising home prices.

However, Canada recorded the steepest increase in inflation-adjusted home prices among these comparable economies over the two decades examined.

The key issue is not population growth alone. It is whether housing construction can keep pace with the number of people who need a place to live.

2. Canada Has Not Built Enough Housing Relative to Demand

Canada has continued to build homes, and its annual construction rate has remained slightly above the OECD average in the years examined. However, that does not necessarily mean construction has been sufficient to meet the country's needs.

Between 2011 and 2022, Canada’s annual housing completions increased only modestly as a share of the existing housing stock, from approximately 1.2% to 1.3%.

Several other countries made greater progress in expanding construction over the same period. Australia, for example, maintained a stronger housing construction rate of approximately 1.7%.

The research also found that housing demand in Canada increasingly outpaced supply beginning in the second half of the 2010s, with the gap widening sharply after 2021.

This distinction matters. A country can build more homes every year and still experience worsening affordability if demand grows faster than the number of available properties.

For Canada, addressing the housing shortage requires more than announcing construction targets. It requires sustained delivery of completed homes that meet the needs of a growing population.

3. Canada Has Fewer Homes Per Person Than Many Comparable Countries

Another important finding is that Canada has fewer dwellings per thousand residents than most international peers and the OECD average.

This existing shortage can make the housing market more vulnerable when demand increases rapidly.

Countries such as Sweden and Norway have also experienced substantial population growth, but their larger housing stocks relative to their populations may have helped moderate price increases.

This highlights an important lesson: housing affordability depends not only on how many homes are being built today, but also on the housing stock a country has accumulated over many years.

When a market begins with fewer homes relative to its population, a sudden increase in demand can place additional pressure on both rents and purchase prices.

4. Low Interest Rates and Rising Incomes Also Contributed

Population growth and construction are not the only factors behind Canada's housing trajectory.

The research identifies rising incomes and low borrowing costs as additional sources of housing demand, particularly since the second half of the 2010s.

When mortgage financing becomes less expensive, buyers may be able to qualify for larger loans, increasing their purchasing power. When more buyers compete for a limited number of properties, prices can rise.

The reverse can also occur. Higher borrowing costs reduce purchasing power and can make it more difficult for households to qualify for mortgages, even when asking prices begin to soften.

This helps explain why housing affordability cannot be measured by home prices alone. Mortgage rates, household incomes, available inventory and the cost of carrying a property all influence whether homeownership is financially achievable.

5. Why Canada's Experience Has Been Different From Other Countries

International comparisons reveal several different housing market patterns.

The United States and United Kingdom experienced significant housing market corrections during the global financial crisis of 2008–2009, followed by recoveries. Canada experienced only a brief interruption in its longer-term price growth.

Other countries, including France and Germany, experienced more moderate growth, while Italy and Japan went through extended periods of limited or no price growth.

Demographic factors, including aging and shrinking populations, may help explain some of the differences.

Canada, Australia and Sweden, meanwhile, experienced relatively sustained price growth following the global financial crisis.

The research suggests that even if Canada had experienced a correction similar to that of the United States, Canadian home prices would still rank among the fastest-growing in the international comparison.

In other words, Canada's affordability challenges developed over decades. They cannot be explained by a single economic event, one government policy or one period of unusually strong demand.

6. What Can Canada Learn From Countries That Build More Housing?

Canada has introduced a range of measures intended to increase housing supply, but international experience suggests there is still more to learn.

Countries that have successfully expanded housing construction at a greater scale offer potential lessons in five key areas:

• Financial incentives: Encouraging the development and delivery of additional housing.

• Planning reform: Reviewing planning systems and approval processes that can affect how quickly housing is built.

• Construction innovation: Exploring more efficient ways to deliver new homes.

• Public land: Considering how publicly owned land can contribute to housing development.

• Country-specific strategies: Adapting successful approaches to local economic conditions, demographics and housing needs.

No single policy will resolve Canada's affordability challenges. Different communities face different constraints, and strategies that work in one country may not translate directly to another.

However, the broader lesson is clear: a lasting improvement in affordability will require sustained attention to housing supply, not simply short-term measures designed to influence demand.

What Does This Mean for Metro Vancouver Homebuyers and Sellers?

For those following the Metro Vancouver real estate market, these findings provide valuable context.

Housing affordability in our region has been a concern for years, and the research reinforces the importance of examining the structural factors behind price growth.

For buyers, affordability involves more than finding a property at a lower asking price. Mortgage qualification, interest rates, monthly ownership costs, available inventory and the range of homes that meet their needs all influence purchasing decisions.

For sellers, the broader economic environment matters as well. Buyer purchasing power, competition from other listings and the balance between supply and demand can influence both pricing and the time required to sell.

Importantly, national housing trends do not tell the whole story of an individual neighbourhood. Conditions can vary significantly by property type, price range and municipality. Understanding local sales, active listings and comparable properties remains essential when making real estate decisions.

For communities across the Tri-Cities, including Port Coquitlam, Coquitlam and Port Moody, the relationship between new housing development, population growth and affordability will remain an important issue to watch.

The Bottom Line: Building More Homes Is Part of the Solution

Canada's housing affordability challenge is the result of years of sustained price growth combined with population growth and housing supply that has not kept pace with demand as effectively as in several comparable countries.

The international evidence suggests that improving affordability will require a long-term approach: expanding the housing stock, improving the delivery of new homes and ensuring construction responds to changing population needs.

For prospective buyers and homeowners, these findings provide a useful reminder that housing markets are shaped by more than interest rates or short-term price movements. Demographics, construction, public policy and the existing supply of homes all play a role.

The central question for Canada is no longer simply how many homes we build each year, but whether we can consistently build enough of the right homes to meet the needs of a growing population.

As governments, developers and communities consider the next phase of housing policy, the experiences of other countries may offer useful lessons. The challenge will be turning those lessons into lasting improvements in housing availability and affordability.

Get all the details: http://cmhcschl.ca/r14l50ZZ7Th

Source: International housing research examining real house prices, population growth and housing construction across Canada and comparable developed economies. International comparisons provide broad insights; differences in data definitions, demographics, institutions and policy mean that individual country results should be interpreted with caution.

Tara Kennedy, REALTOR® | Royal LePage West Real Estate Services

Serving Port Coquitlam, Coquitlam, Port Moody and the Tri-Cities.

📞 236-992-8989
🌐 www.tarakennedy.ca

Real estate decisions are best made with an understanding of both the broader market and the conditions affecting your specific property and neighbourhood.

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