Canada’s housing market is hot. Home prices have rocketed 30% since early 2020, and the Canadian Real Estate Association recently reported that the average price of a Canadian home was nine times the average household income.
It wouldn’t be ridiculous to assume that things might be comparable just across the border to the south in the U.S. In fact, price increases in the U.S. have been only slightly lower, at 27%. Despite this, the standard home in Canada now costs twice as much in the U.S. There is clearly more to the story here.
Canadian Housing Market vs. The U.S. Housing Market
Just how much more expensive is the Canadian market compared to the U.S.? Here’s some perspective. Home prices in both countries have been rising since 2010; however, while disposable income in the U.S. has roughly matched its home prices, Canadian disposable income has become entirely uncoupled from them.
Disposable income in the U.S. is only about 10% higher than its neighbour to the north, but Canadian home prices are about 75% higher than in the U.S. What this tells us is that despite a surge in the price of real estate in the U.S., it is likely not in a bubble. In contrast, Canadian prices are severed from fundamentals, which should unsettle any would-be investor.
What if The U.S. Market Was as Hot as Canada’s?
To further put the dramatic difference in perspective, let’s imagine that the U.S. had a comparably hot market. The average median home price in the United States is roughly $375,000. If what’s happening in Canada happened in the U.S., the median home price would jump to around $656,000.
That’s just the median. Expensive coastal real estate markets likely wouldn’t see an increase of 75%, but it’s possible that they would jump by double-digit percentages.
Most Affordable Countries in the World
The U.S. real estate isn’t just more affordable than Canada’s, it’s the second most affordable country in the world, according to data from Numbeo, Canada is the 17th. The report takes income, gross rental yield, price-to-rent, and international mortgage as a percentage of income into account when ranking each country.
According to the data, the average Canadian spends a whopping 49.62% of their income on their mortgage.
Investing in Real Estate in the U.S.
Canadians are buying US real estate. In fact, Canadians bought more real estate in the United States from April 2020 to May 2021 than any other country in the world, spending about $4.2 billion dollars (foreign buyers from the U.K. only spent $2.3 billion).
Furthermore, in 2022, the Canadian government announced that it will ban overseas buyers from buying houses in Canada in hopes that it will help the housing market cool off. This will likely funnel more investment into U.S. real estate.
Despite being a business-friendly economic powerhouse, with geographic diversity, excellent weather, and an abundance of land, real estate in the United States remains a bargain and one with great potential for returns.
America Mortgages is the world’s leading U.S. mortgage specialist based overseas. We are expats ourselves so know exactly how to best serve you. Explore your possibilities when you speak to our U.S. mortgage specialists today!
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