Real estate cannot go up by 3.5% in real terms indefinitely says Shiller. Yet for the past 14 years on average, Canadian home prices grew by 4.5% each year. When you add it all up you have a housing market inflated to the same degree as the peak of the US housing bubble.
Interestingly, Shiller says that the Canadian property market is not a bubble as there was no sharp increase. "It's unexciting but it accumulates" he said. If you include a "sharp increase" in the definition of a housing bubble, then yes - it's not. However in my view it's all semantics and it doesn't change the end result.
You can have home prices rise steadily by 4% and then crash 25% in a span of few years (as it happened in the '60s). Conversely you can have home prices jump 20% a year and then slowly melt over a decade (as it happened in the early '90s).