House of Cards: Canada’s Overreliance on Real Estate

Illustraton by: Jasmin Rezkalla

Picture an idyllic scene of white picket fences, a well-manicured front lawn and backyard, and a pool for the kids to play in. This is an ideal of homeownership, which has often been cited as a main tenet of the “Canadian Dream.” For many, owning one’s home is indicative of success and financial prosperity. However, as a result, housing has become a primary vehicle for building wealth. Government and financial institutions have reinforced this trend with decades of incentives, turning real estate into a dominant force in our economy. While this has benefitted homeowners, it has also introduced economic vulnerabilities and widened inequality across Canada.

Housing can and should still be a valid path to wealth. However, Canada’s cultural and economic overreliance on these assets, both on the part of individuals and corporations, has hindered investment into more productive sectors, inflated household debt, and made the economy increasingly fragile amid shifts in the market.

How Housing Became Central to Canada’s Wealth Strategy

Homeownership has long been tied to Canada’s idea of stability and success. After the end of World War II, a perfect combination of rising wages, increased suburban development, and accessible mortgage lending brought this goal within reach for much of the population.One of the most notable government programs to reinforce this ideal was the Home Buyers’ Plan (HBP), introduced in 1992, which currently allows first-time homebuyers to withdraw up to $60,000 from their Registered Retirement Savings Plan (RRSP). By allowing Canadians to dip into their retirement savings, the HBP cemented housing as a long-term investment and not just a place to live. At the same time, large banks began offering longer mortgage amortization periods of up to 30 years, which made these large loans feel more affordable and fueled the belief that buying property was easily accessible and always financially smart.

Today, as a result of these initiatives, housing holds a central place in Canada’s economy. Real estate and rental leasing now accounts for about 13 per cent of national GDP—a larger portion than any other sector. Although there are no precise estimates, related sectors like construction and forestry are closely tied to real estate activity and likely push its true economic footprint higher. Additionally, Canada’s rate of residential investment far exceeds that of comparable countries with developed economies, and home equity now makes up the majority of household wealth. This concentration is especially stark when comparing homeowners and renters. The gap in net worth between those who own property and those who do not has widened significantly in the past decades. As a result, housing has become a key driver of economic activity, but also a potential source of inequality and financial instability

Source: Statistics Canada

Inequalities Caused by Housing-Driven Policies

Local housing rules often make it difficult for newcomers to enter the market, especially those without the privilege of inherited wealth or high incomes. These policies inevitably determine who gets to build equity and who gets left behind, deepening the divide between homeowners and renters.

Zoning Rules

Zoning bylaws regulate what types of buildings can be constructed in different areas. In many Canadian cities, these rules prioritise single-family homes and limit higher-density housing like duplexes or apartment buildings. While they originally set out to organise communities, they now restrict housing supply and raise prices by making it harder to build more affordable multi-unit housing in desirable areas. This scarcity reinforces the idea that housing is a limited, high-value asset worth investing in, making existing properties more lucrative because new ones are so restricted. The result is a market where prices remain artificially high, locking out lowerand middle-income households from ownership in many urban areas.

NIMBYism

“NIMBY,” or “Not In My Backyard,” refers to local opposition to new developments, especially to aforementioned affordable high-density buildings. NIMBY attitudes often stem from resident fears about declining property values or changes to neighbourhood demographics, and they frequently influence city councils to block or delay construction projects. This again restricts housing supply and preserves the status quo for homeowners, keeping real estate value high and reinforcing housing as a prized investment. Over time, these decisions push new and more affordable housing to less desirable locations, which limits economic mobility and deepens geographic segregation by income.

A zoning map of Toronto, Ontario. Over half of the city area is dedicated to low-density single-family homes. Source: Jeff Allen, University of Toronto School of Cities

Over time, these policies have maintained the status of homeownership as a powerful tool for building wealth. But access to this tool has remained deeply unequal. In 2023, homeowners aged 55–64 with an employer pension had a median net worth of $1.4 million, while renters without a pension reported just $11,900. Even among younger households, the divide is stark; those under 35 who owned their homes had a median net worth of $457,100, compared to just $44,000 for non-owners. On the surface, these statistics may seem obvious. Of course people who own their homes have a higher net worth, as their property counts towards their assets. However, these figures reveal just how deeply real estate is entrenched in Canada’s wealth-building model, and how severely those without access to homeownership are disadvantaged in achieving long-term financial security.

The Opportunity Cost of Real Estate Investment

In addition to consumer behaviour, it is crucial to zoom out and analyse how the Canadian love of real estate has manifested in the behaviour of companies. As the property-driven policies outlined in the previous section have propped up real estate prices and turned it into an unnaturally reliable investment, corporations have adjusted their investments accordingly. In Canada, real estate has become a preferred destination for corporate capital. From 2015 to 2021, Canadian investment in residential dwellings as a share of GDP was more than double the level in the United States, and investment in non-residential structures like office buildings and warehouses was also 75 per cent higher than in the U.S. Corporate investment in information and communications technology (ICT) was 30 per cent lower than in the United States, and investment in intellectual property products such as patents and R&D was 49 per cent lower. These areas drive long-term innovation and productivity. For everyday Canadians, they create jobs and grow wages. Yet among many Canadian companies, they have been deprioritised in favour of property appreciation and consistent returns. This mirrors the behaviour seen at the household level, where real estate is also viewed as the safest path to financial stability.

Driving these trends is a powerful incentive structure. Residential property in Canada has been a consistently high-yield investment: home prices grew by 12.3 per cent annually between 2015 and 2021, compared to just 5.8 per cent in the United States. In that same timeframe, Canadian business investment was relatively uncompetitive, with our national stock market underperforming compared to that of the United States. For corporations, the message has been clear: investing in property leads to better and more reliable returns than innovating or expanding into new sectors. But while real estate may offer short-term profits, it does not boost productivity or global competitiveness in the same way that intellectual property, advanced manufacturing, or new technology can. The result: a national economy that has become overly reliant on real estate prices to sustain growth, leaving little room for the dynamic investment needed to power the next generation of Canadian industry.

Concentrated Wealth: Risks to Financial and Economic Stability

Now understanding housing-driven government policies and corporate investment strategies, we must now shift our attention back to individuals. The consequences of Canada’s overreliance on real estate is most visible amongst everyday people, not just in corporate balance sheets and GDP reports. The value of housing, like any other asset, can rise and fall. However, when everyday Canadians have the bulk of their wealth tied up in these highly-priced and potentially volatile investments, their financial stability is put at serious risk. As the Canadian housing market cools from COVID-era highs, the financial risk of concentrated wealth has become apparent. An Ipsos survey conducted during this peak found that the proportion of household wealth tied up in real estate for an average Canadian was 77 per cent. For seniors, this share was at a low of 68 per cent, while it reached a high of 89 per cent for young adults in Generation Z. This overconcentration exposes homeowners to serious risks in times of economic volatility. When prices rise, as they did during the pandemic, households may feel financially secure. But as prices fall, many may find themselves unprepared. With so much of their wealth locked in a single, illiquid asset, families may struggle to adapt to unexpected costs or interest rate hikes. In this context, real estate becomes less a symbol of financial stability and more a fragile bet on continued market growth.

Beyond individual risk, this concentration has serious implications for long-term financial planning. Many Canadians are relying on rising home values to fund their retirement, while neglecting traditional investments like stocks and bonds that offer steady, liquid returns. Real estate has outperformed at times, but that growth, like with any investment, is not guaranteed. According to the Globe and Mail, average resale prices rose over 20 per cent annually from 2015 to 2021, before falling by nearly 23 per cent. Analysts expect further cooling. In contrast, long-term returns for U.S. and Canadian equities sit around 6.3 to 6.6 per cent per year. While less dramatic, they provide reliability, liquidity, and diversification, which are qualities Canadians need more than ever. Without broader investment strategies, households risk tying their financial futures to a market increasingly beyond their control.

Benchmark prices for Canadian single-family homes. Source: Canadian Real Estate Association

Rethinking Wealth: Investing Beyond Housing

Ultimately, our country’s deep attachment to homeownership has shaped how we live and build wealth. Additionally, it has determined how government and financial institutions have set policies and grown our economy for decades. While real estate will likely remain a pillar of financial security and success for many, its outsized role has crowded out more productive investments and amplified inequality. As the market cools and economic risks grow, it is imperative that we question what kind of economy we want to build and who it should serve. Do we want an economy built on ever-rising house prices, or one grounded in innovation, stability, and shared prosperity? Do we want a society where wealth is tied to the luck of property ownership, or one where everyone has a fair shot at financial security? To shift away from our dependence on housing as the primary engine of wealth, we need to invest in broader financial literacy and create pathways to diversify where Canadians put their money. Promoting education around stocks, bonds, and other accessible investment tools can help individuals build more resilient portfolios. At the same time, governments and corporations must prioritize innovation and productivity. when crafting economic policy. A more balanced approach to wealth-building will strengthen both household stability and the long-term health of Canada’s economy