Average home prices rose by over 300% since 2000. Yet over the same period, Statistics Canada reports that total inflation rose by 48%. That’s a pretty major disconnect.

Gen Squeeze is calling on Statistics Canada to remedy its flawed inflation measure which does not adequately consider rising home prices, sending the wrong signals to the Bank of Canada to guide inflation policy. This explains why increases in food and gas prices triggered interest rate hikes – while decades of increases in home prices did not.

Underestimating inflation sustains the cheap credit system. Low interest rates decrease the cost of larger mortgage debt. Buyers able to borrow more bid up prices. Rising prices aren’t adequately captured in inflation data. This is a dangerous feedback loop for our housing system.

Some first-time buyers may welcome low interest on the frighteningly large mortgages needed to straddle the massive gap between home prices and earnings. But this individual coping strategy reinforces broader trends that work against first-time buyers. Current homeowners with more capital use low interest rates to outbid their novice rivals, which is why Census data reveals that more new homes are bought by investors, and that one in six Canadian homeowners now owns multiple properties.