The Minister of Families, Children and Social Development asked CMHC to study the causes of rapidly rising home prices in major metropolitan centres across Canada since 2010. In fulfilling this task, we have performed advanced, data-driven quantitative and statistical analyses, and engaged with stakeholders and government partners. This report elaborates on our analytical results. We concentrate in our analysis on the period of escalating home prices from 2010 until 2016, prior to the imposition of policies by provincial governments. Analysis Cities across Canada show marked differences in the growth of their prices. While Toronto and Vancouver showed large and persistent increases in prices, there was only modest price growth in Montréal.
Despite softer local economic conditions, home prices in oil-dependent Calgary and Edmonton ended the period slightly higher. Examining the path of house price growth requires looking at both supply and demand. We started our work by looking at conventional demand factors. Patterns of economic and population growth together with lower mortgage rates do indeed explain a substantial part of price changes in Canadian cities. Incorporating supply takes our analysis further. As the U.S. economists Ed Glaeser and Joseph Gyourko pointed out, “High prices always and everywhere reflect the intersection of strong demand and limited supply.” We found that over the last seven years overall, the supply response of new housing in Toronto and Vancouver was weaker than might have been expected given the upsurge in demand.