Posted Posted originally on CTH on Mar 11, 2026 by Martin Armstrong |  

Canada’s housing market has become one of the most expensive in the developed world, and the affordability crisis continues to worsen despite rising interest rates. Mortgage payments as a share of household income are now near record levels, leaving many first-time buyers completely priced out of the market while existing homeowners face significantly higher borrowing costs as loans reset.

For more than a decade, ultra-low interest rates fueled an enormous expansion in mortgage credit. Cheap money encouraged speculative investment in real estate while governments simultaneously restricted new housing supply through zoning, regulatory hurdles, and lengthy permitting processes. Prices rose far faster than wages, creating the illusion of prosperity as homeowners watched property values climb year after year.

The structural problem is that when housing becomes the primary engine of economic growth, the entire system becomes dependent on constantly rising property prices. Once interest rates increase or credit conditions tighten, the pressure begins to build across the entire market. Canada is now experiencing that transition as higher borrowing costs collide with historically elevated housing prices.

Recent data show that housing affordability remains near the worst levels ever recorded in Canada. In many major cities such as Toronto and Vancouver, mortgage payments on a typical home now consume well over half of the median household income. Younger generations increasingly find themselves locked out of home ownership entirely, while investors who purchased multiple properties during the boom are facing rising financing costs.

Real estate cycles have always been driven by credit expansion and confidence. When interest rates were artificially suppressed, housing markets could expand indefinitely. But once borrowing costs normalize, the imbalances created during the easy money era begin to surface. Canada’s housing market now stands as one of the clearest examples of how prolonged monetary stimulus can inflate asset prices far beyond what the underlying economy can sustainably support.

I will be speaking live in Vancouver at the end of the month at the 2026 World Outlook Conference. Naturally, issues surrounding the Canadian economy, such as housing, will be at the focal point.