Global Bubble Comparison: Is Canada the Worst?

Whenever I point out the insanity of Canadian home prices, defenders of the market inevitably say: "But it's happening everywhere! Look at London! Look at Sydney!"

Is it? Yes, housing is expensive in other global capitals. But when you look at the rate of change, the decoupling from local incomes, and the exposure to variable rates, Canada stands alone on a very dangerous podium. We have built the most fragile housing market in the developed world.

1. The Great Divergence: Canada vs. USA

Comparing Canada to the United States is the most revealing exercise. We share a continent, a language, and deep economic ties. Historically, our housing markets moved in lockstep. If the US went up, we went up.

The 2008 Split
The divergence happened in 2008. The US housing market crashed. Prices fell 30-50%. They spent a decade deleveraging (paying off debt). Canada, protected by a strong banking sector, didn't crash. Instead, we took the low interest rates meant to save the US economy and used them to fuel a massive debt binge.

While Americans were foreclosing, Canadians were bidding war-ing. Today, the average home in Canada is roughly 40% more expensive than the average home in the US, despite Americans earning significantly higher incomes (in stronger dollars).

2. The "Ticking Time Bomb" of Term Risk

The price is only half the story. The structure of the debt is the other half. This is where Canada is uniquely vulnerable.

The US 30-Year Fixed Safety Net
In the US, you can lock in a mortgage rate for 30 years. If you bought in 2021 at 2.8%, you keep that rate until 2051. It doesn't matter if the Federal Reserve raises rates to 10%; your payment never changes. This insulates millions of American homeowners from interest rate shocks.

The Canadian 5-Year Gamble
In Canada, the longest standard term is 5 years. Every single mortgage in this country "resets" at the current market rate every 5 years. This means 100% of Canadian mortgage debt is exposed to interest rate risk. We are currently walking off the "Renewal Cliff," where borrowers who locked in at 1.5% are renewing at 4.5% or 5.0%. This structural difference makes Canada infinitely more sensitive to rate hikes than the US.

3. The Tale of the Tape

Here is how we stack up against other "bubble" candidates. Australia and New Zealand are the only true comparables (the "Commonwealth Disease"), but even they look sane compared to our recent numbers.

4. The Economy That Sells Houses to Itself

You often hear that "Real Estate is the engine of the Canadian economy." That should terrify you.

Real Estate, Rental, and Leasing (FIRE) accounts for over 13% of Canada's GDP. In the US, it is roughly 6-7% (excluding imputed rent). We have diverted our capital away from productive investments—like building factories, funding tech startups, or R&D—and poured it into unproductive assets (existing houses).

A house does not produce anything. It does not export goods. It just sits there. When you build an economy on trading existing houses back and forth at higher prices, you create a "wealth illusion" without real productivity growth. This is why Canada's GDP per capita has been stagnant while the US surges ahead. We chose assets over innovation.

5. The Population Demand Shock

The one factor that defends the "Bull Case" for Canada is population growth. No other G7 nation is growing as fast as we are.

In 2023-2024, Canada grew by 3.2%. The US grew by 0.5%. The UK grew by 0.3%. We added the equivalent of a "Nova Scotia" in population in one year. This creates a demand floor that other bubble markets (like New Zealand or Sweden) don't have. Even if prices are irrational, if you have 10 people fighting for 1 rental unit, prices stay high.

However, this is a double-edged sword. Rapid population growth without infrastructure growth creates social friction, failing healthcare, and inevitably, a political backlash (which we are seeing now with revised immigration targets).

6. Who Pops First? Lessons from New Zealand

New Zealand is our closest sibling. Same banking system, same foreign buyer issues, same obsession with land. New Zealand's bubble popped in 2022. Prices fell 20-25% from peak.

Why did they pop while we held on?

• Reserve Bank Aggression: Their central bank raised rates faster and harder.
• Tax Reform: They banned mortgage interest deductibility for investors (Canada hasn't ... yet).
• Zoning Reform: They forced aggressive upzoning years before us.

Canada is following the New Zealand trajectory, just on a 2-year lag. We used negative amortization to delay the pain, but we cannot avoid the math forever.

Conclusion: The Lonely Bubble

It is comforting to think "it's happening everywhere." It makes us feel like victims of global forces. But the data shows that Canada's crisis is largely homegrown.

We chose to keep rates lower for longer. We chose to restrict supply. We chose to ramp up population without a plan. Comparing ourselves to the US is a sobering reality check. They fixed their issues in 2008. Ours are just beginning.