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Originally Posted by CliffFletcher
But it can’t just be interest rates either. Japan has had rock-bottom interest rates for almost 20 years now and we haven’t seen real estate prices climb like they have here. Same with most of Europe.
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Japan had a catastrophic asset crash in the early '90s that they still haven't really recovered from because of stagnant growth (both economic and population). Look at the Nikkei; it's still ~30% below its 1989 peak.
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Housing prices climbed steeply all over the developed world in the last decade. But they’ve climbed much steeper in Canada’s major cities (and a handful of others like Sidney and Auckland) than elsewhere. The Economist has written stories singling out Canada’s housing bubble, because it’s recognized as being especially egregious. Why? What’s different about Toronto and Vancouver compared to Vienna and Osaka?
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If supply of housing units was the primary culprit, then rents would have increased in concert with housing prices, but they haven't in Canada. Based on OECD data, Canada has seen one of the lowest increases in rental prices in the OECD. Since 2010 we're 30th of 38 OECD nations in rental price increases.
That points to something other than supply being behind the rise which sets Canada apart from peer nations. The most obvious factors to me are: a) monetary/government policy which has created an asset bubble, and b) an outsized influence from property investors, as that would tend to drive up purchase prices relative to rental prices (since it's constricting purchase supply but bolstering rental supply).
Now I'm not saying for a second that more supply wouldn't make housing more affordable; it would and we should increase it. But the supply relative to our population has remained static for the last couple of decades, so the idea that there's some shortage now that didn't exist before, and that that's driving house price increases isn't really supported by the evidence.