Most Americans aren’t aware that Canadian home prices continued to increase after our 2006 real estate crash. There are reasons for that.

First, Canada didn’t have the subprime crisis in lending like we did. Households there had to put up substantial deposits and show real proof of income. Imagine that!

Second, Canada has had higher immigration rates than us since the early 1970s, and more so since 2006. This has caused households to grow at 1.4% since 2006, double the rate in the U.S., which is 0.7%.

But here’s the rub!

Canada’s prime housing segment – age 20 to 44, which includes apartment demand from ages 20 to 26 – is now forecast to decline from 1.2% in 2012 to 0.3% in 2021. Ouch!

And worse, Canada’s household debt-to-disposable-income ratio has risen to 156% while in the U.S. that ratio has fallen to 99%. Back in 2007, the ratio for both countries was around 120%, more than double the ratios at the peak of the last great bubble in 1929.


The reality is Canada’s household debt has doubled from 78% in 1990. It is now 57% higher than in the U.S., despite our continued over-indebtedness.

That means that even if the growth of the prime-buying segment were not to slow dramatically in the years ahead, such debt ratios would wreck the party sooner rather than later.

The chart below tells the real story.

See larger image

Since the real-estate bubble began in early 2000, Canada’s home prices are up 133%. The U.S. property market had only gained 107% by its peak in early 2006.

Canada’s bubble has lasted longer and stretched 24% higher than ours, with home prices now 47% higher than the U.S.

And as I say – and as history proves – the bigger the bubble, the bigger the burst. Put another way, Canada’s in for some serious pain.

The most overvalued city is Vancouver and it gets that dubious distinction thanks to the wealthy Chinese immigrating there and buying condos with bags of cash, like drug dealers from Brazil are doing in Miami. Property there has gone up 152% since 2000.

Locals can’t afford the 10- or 11-times income valuations that are now slightly higher than San Francisco’s, which were at the top of the U.S. bubble before it burst. When most locals can’t afford property, that’s a bad sign.

Recall that it wasn’t the failing economy that caused home prices to start falling from 2006 forward in the U.S. It was simply prices that were so high that young, new households could no longer afford them.

Young people (age 27 to 41) buy houses. Older people sit in them! That’s why the dramatic slowdown in Canada’s 20 to 44 year-old population is tolling Canada’s property market’s death knell.

If the next global financial crisis starts in early 2014, as I forecast, then Canada’s real estate is cruising for a bruising very soon.

So Canadians, beware!

Since your real estate is at new highs, in the coming years it will fall much further than the crash we experienced in the U.S., even if it never quite falls as low as we do.

The seven Canadian cities that have appreciated the most since 1999 – and which face the most pain ahead – are in order:

#7: Montreal
#6: Toronto
#5: Vancouver
#4: Calgary
#3: Edmonton
#2: Quebec City

And at #1 – the city that has appreciated the most in Canada since 1999 – we have: Winnipeg.

The higher the real estate prices in these cities, the harder they’re likely to fall.

Vancouver’s pending property collapse could trump them all in the end thanks to its extreme valuations.

Don’t be like most consumers and economists that just extrapolate past trends into the future. Listen to people like us that understand bubbles and cycles from tirelessly and obsessively studying them throughout history.

So to answer my question – did Canadians learn anything from our real estate bubble: absolutely not.

I’ll say it again: Canadians, beware!



Ahead of the Curve with Adam O’Dell

Canada’s Bust is Coming

If you’ve been a subscriber to Boom & Bust since the start of 2012, you likely already know that the Canadian real estate market is a ticking time bomb.

Harry Dent
Harry S. Dent Jr. studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of his chosen profession that he turned his back on it. Instead, he threw himself into the burgeoning new science of finance where identifying and studying demographic, technological, consumer and many, many other trends empowered him to forecast economic changes. Since then, he’s spoken to executives, financial advisors and investors around the world. He’s appeared on “Good Morning America,” PBS, CNBC and CNN/Fox News. He’s been featured in Barron’s, Investor’s Business Daily, Entrepreneur, Fortune, Success, U.S. News and World Report, Business Week, The Wall Street Journal, American Demographics and Omni. He is a regular guest on Fox Business’s “America’s Nightly Scorecard.” In his latest book, Zero Hour: Turn the Greatest Political and Financial Upheaval in Modern History to Your Advantage, Harry Dent reveals why the greatest social, economic, and political upheaval since the American Revolution is on our doorstep. Discover how its combined effects could cause stocks to crash as much as 80% beginning just weeks from now…crippling your wealth now and for the rest of your life. Harry arms you with the tools you need to financially prepare and survive as the world we know is turned upside down! Today, he uses the research he developed from years of hands-on business experience to offer readers a positive, easy-to-understand view of the economic future by heading up Dent Research, in his flagship newsletter, Boom & Bust.