YK Real Estate Realities: Debunking the ‘Canadian Housing Bubble’

I don’t envy the Yellowknifer who tries to get a handle on the real estate market by reading national or local media coverage. As far as I can tell, most articles start with what everyone has noticed – the price tags on houses nowadays or the number of new listings – and go on to confirm those observations. To understand our market we need context and perspective.

In January, I wrote about the makeup of the NWT economy and how it contributes to our cost of living. That series focused on restricted housing supply, through high construction costs and limited rental market competition. But Yellowknifers have fair questions about how the demand side of the market works, too. I am frequently asked, for example, how house prices can be rising when our population has been basically flat for a decade.

With national news mostly covering the ‘over-priced’ Toronto and Vancouver markets, it’s easy to get swept up in the idea that Canadian housing prices are high, but real estate, like traffic, is local. 

In this series we will look more closely at the demand side of the market. We will ferret out what’s really behind the so-called “Canadian real estate bubble,” why population numbers don’t map well onto the number of house-buyers and what changing income levels do to the Yellowknife market. And we will have some fun with a few of my favourite things: charts, graphs and data.

The ‘Canadian’ real estate ‘bubble’

What does a one-bedroom condominium worth £1 million look like?  

Article continues below advertisement

It was the guessing game my business partner Rob and I were playing for the entire train ride from Oxford on our way meet up with a friend who markets high-end developments in central London. With £1 trading at around $2 Canadian, the value of the condominium in the “second tier” neighbourhood of Fitzrovia is approximately the same as an entire CloudWorks condominium building in Yellowknife.

After a weeklong professional development course in the UK where we spent the bulk of our time dumbfounded by UK housing prices, we were starting to understand the phenomenon.

Sam Gamble, right, and his business partner Rob Warburton on a quest to understand the insanity of London housing prices. Spoiler alert: it’s not the weather than makes it a haven for wealthy overseas buyers

To really understand the insane London house prices, you have to first imagine that you are an ultra-wealthy foreigner. Pretend your wealth comes from one of the many unstable countries of the world and that you want to store some of your wealth in real estate abroad. What criteria would be on your list?    

First of all, you’d want the country to be very stable, economically and politically. It must have a history of respecting property rights – there’s no sense moving money out of one unstable region, only to get it taken in another. Outside of your mother tongue, you’d want the local language to be your second language: usually English. It should also have a relatively big city where it’s easy to buy and sell real estate. Finally, the city should be an attractive place to live, play, send your kids to school and have other ultra-wealthy people to pal around with.   

With those criteria in mind, the list of places to buy a second (or fifth) home is pretty short; probably fewer than 10 cities. This is why Laurence Fink of BlackRock was quoted saying: “The two greatest stores of wealth internationally today are contemporary art, and apartments in Manhattan, Vancouver and London.”

This understanding of the London market puts other global city real estate markets into a different light. Just like Apple company stock, a barrel of oil or US Treasury bills, Vancouver and Toronto real estate are a globally traded asset. This divorces real estate prices from local income levels, because local people aren’t the only people buying real estate. And like any other globally traded asset, Vancouver and Toronto real estate prices should be quoted in the global currency – US dollars. Let’s take a look:


As we can see from this graph, the so-called Vancouver housing bubble looks very different in US dollars; the notorious rising trend is replaced by a gentle decline. “Bubble fears spread beyond housing bears as Vancouver condo building smashes records” – a real headline from the Financial Post, no less – reveals itself as meaningless. For the foreign buyer, a more appropriate headline could read, “Vancouver homes still 12 percent below their July 2011 peak.”

The same is true in Toronto, where there has been a more recent and precipitous decline, billed as a bubble:


The Toronto Star headline, “Toronto, Vancouver sales of luxury homes ‘to defy gravity’ this spring,” could better serve the global perspective as “Gravity works as expected as Toronto homes drop 13 percent in value since July 2014.”

So what does this mean for anyone in Yellowknife looking to buy or sell real estate? It means we should exercise caution when trying to apply Canadian indexes to our own city. Even in the most diverse real estate index, the one widely quoted by the National Bank, Vancouver and Toronto comprise 55 percent of the ‘Canadian market.’ That means that half of the data are based on places where different mechanisms apply (Yellowknife real estate is not exactly a magnet for overseas real estate speculation). Also, given that the majority of the English speaking Canadian media are based in those two cities, we get an over-saturation of Toronto and Vancouver’s local stories being dispersed nationally.  

With national news mostly covering the ‘over-priced’ Toronto and Vancouver markets, it’s easy to get swept up in the idea that Canadian housing prices are high, but real estate, like traffic, is local. You don’t plan your drive to work while listening to Toronto traffic, so don’t listen to Toronto real estate stories and apply them to your Yellowknife housing transactions.

But returning to the original question, what does a £1 million condominium look like? It looks like a renovated 1-bedroom in Northern Heights with a doorman, because no one cares what a barrel of oil or a US Treasury bill looks like; they only care what it’s worth – in US dollars.

 Look for Part 2 of this series on Wednesday, May 4. 

This Article Is Part of a Series

Next: YK Real Estate Realities, Pt. 2: The Shifting Buyer

Sign In


Reset Password

Please enter your username or email address, you will receive a link to create a new password via email.

Subscribe To Jobs North Alerts

You are subscribing to jobs matching your current search criteria.

Email notifications will be sent to you Subscribe