One in three Canadians considering “workarounds” to buy a home amidst declining housing affordability in Canada, supply shortages
- Of those Canadians who are considering alternative ways to become homeowners, 54% are Millennials and Gen Z
- 15% of Canadians reported they were able to grow their savings during the pandemic and plan to use these funds as a down payment on a home in the next six to 12 months
- Winnipeg and Regina continue to be two of the more affordable markets in Canada year-over-year, with an average selling price below $350,000
- St. John’s tops the list of most affordable cities in 2021, with an average selling price at $307,619
- 45% of Canadians agree that a national housing strategy would improve their ability to own a home
Mississauga, ON and Kelowna, BC (July 20, 2021) — In a new report exploring housing affordability in Canada in 2021, RE/MAX found that one in three (33%) Canadian homebuyers is exploring alternative options to help them get a foot into the housing market. These include renting out a portion of a primary residence (21%), pooling finances with friends or family to purchase a home (13%) and living with like-minded neighbours in a co-op/shared living arrangement (7%).
According to a Leger survey commissioned by RE/MAX, 42% of Canadians said the high price of real estate was a barrier to entry into the market. This is up just 4% over last year – surprising, given the consistent price growth experienced by housing markets from coast to coast over the past year. Among prospective homebuyers, millennials and Gen Z are most likely to consider alternative regions and communities, and/or financing options to keep affordability in play.
“It’s promising to see Canadian buyers deploying their ingenuity to be able to buy a home, but we must address the urgency of the underlying housing affordability crisis in Canada, which is predominantly systemic,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “While we wait for a nationally and municipally supported housing strategy based on an aggressive goal to boost our national inventory of affordable housing, there are regions across the country, especially in Western Canada, that remain accessible to first-time buyers looking to break into the market.”
Key barriers impacting personal housing affordability in Canada, according to consumers:
- a shortfall in salary (26%)
- the fear of rising interest rates (18%)
- the fear of being “house poor” (18%)
- lack of steady full-time employment (16%)
- current levels of household debt (11%)
- the mortgage stress test (11%)
Housing Affordability Index
RE/MAX Canada analyzed house price to income ratio by city in Canada. Here’s how they ranked.
Regional Housing Affordability in Canada
Canada’s two largest cities, Toronto and Vancouver, have struggled with significant housing affordability challenges, mainly due to low supply and high demand spurred on by low interest rates. Unsurprisingly, both cities have remained at the bottom of the list year-over-year when it comes to housing affordability in Canada. At the other end of the spectrum, St. John’s, NL has replaced Regina, SK as the most affordable Canadian city to buy a home in 2021.
VANCOUVER remains unchanged as Canada’s least affordable city year-over-year. The most popular type of property for first-time homebuyers in 2021 has been condominiums, which hasn’t shifted. Typically, buyers in Vancouver are willing to push their budgets modestly to attain the home they desire.
When it comes to factors that are influencing affordability in the region, the following are most likely to improve affordability: changing interest rates; economic/employment conditions; and business re-openings. On the flip side, tightened mortgage lending rules; returning immigration numbers; out-of-province/out-of-region buyers; and low or diminishing housing supply are believed to negatively impact affordability in the area.
The three most affordable neighbourhoods in Vancouver are East Hasting, Downtown (Vancouver East and Renfrew) and Collingwood. The three least affordable neighbourhoods in Vancouver are Shaughnessy, UBC and Point Grey.
Some alternatives to individual home ownership that have become relevant in Vancouver since the start of 2021, are pooling finances with friends or family to purchase a property, purchasing a property that is lived in by the owner while also being partially rented to supplement monthly payments, otherwise known as an income property, and choosing to rent instead of buying. Vancouver was seeing constant multiple offer scenarios and over asking prices until recently. It is not expected that Vancouver will see the cooling off of house prices in the fall and winter of 2021 due to ongoing regional demand.
When compared to Vancouver’s high-priced market, Calgary and Edmonton have both seen an influx of new and prospective buyers influenced by the lower priced housing options offered, as well as appealing liveability factors, such as green spaces and proximity to employment. Low commercial rental rates have also helped to diversify the employment sectors in areas like manufacturing and technology.
CALGARY ‘s most popular type of property for first-time homebuyers in 2021 has been single-detached homes, which has not shifted year-over-year. Typically, buyers in Calgary are willing to push their budgets modestly to attain the home they desire.
When it comes to factors that are influencing affordability in the region, changing interest rates and employment/economic conditions and likely to have a positive impact. On the flip side, tightened lending rules, low or diminishing housing supply, continued interest in larger homes putting pressure on supply; and demand from out-of-province/out-of-region buyers are believed to negatively impact affordability in the area.
The three most affordable neighbourhoods in Calgary are North East Calgary, South East Calgary, and regionally in the province of Alberta, Airdrie, Cochrore and Strathmore. The least affordable neighbourhoods in Calgary are Britannia, Bel-Aire and Upper Mount Royal.
An alternative to individual home ownership that has become relevant in Calgary since the start of 2021 is using portion of a principal residence as an income property, to supplement monthly mortgage payments and offset bills.
Calgary is a lot more affordable when compared to other major cities in Canada, and it has been in a prolonged weak economy since 2015 which affects the housing market. Some pockets of Calgary are still seeing multiple-offer scenarios, but the trend is price- and location-specific. Overall, Calgary has seen a slowdown in activity and price increases recently. Prices are already cooling this summer, which is normal and is expected to continue due to tighter mortgage regulations. Current average sale prices range from $266,868 to $588,541, depending on the property type.
EDMONTON first-time homebuyers have been gravitating toward both single-detached and semi-detached homes in 2021. This has shifted from last year, with the increased desire to own a home with a backyard. Another high-demand trend this year is the desire for new homes, as the idea of being the first one to live in it is appealing to buyers. Typically, buyers in Edmonton stay within their budgets when purchasing a home.
When it comes to factors that are influencing affordability in Edmonton, interest rates, high rental rates, economic/employment conditions, increased housing supply and legal basement suites would have a positive impact on regional affordability. On the flip side, an increase in housing prices, and the stress test are believed to negatively impact affordability in the area.
The most affordable area of Edmonton is Central North, where a two-bedroom bungalow with full basement (approximately 900 sq. ft.) would sell for between $160,000 and $190,000. The most expensive area of Edmonton varies on location. Edmonton’s Majestic North Saskatchewan River Valley View properties, as an example, are priced anywhere from $1,500,000 to $5,000,000.
An alternative to individual home ownership that has become relevant in Edmonton since the start of 2021 has been renting out a portion of a principal residence to supplement monthly mortgage payments. In the last three months, Edmonton has seen more multiple-offer scenarios, which is concerning more buyers. A unique trend this year in the Edmonton housing market has been people living within a five- to 10-minute distance of their place of work, for convenience. It is not expected that Edmonton will see the cooling of house prices in the fall and winter of 2021 because of ongoing regional demand.
TORONTO, has seen many first-time homebuyers in 2021 flock to single-detached homes, but condominiums remain the most affordable choice. Typically, buyers in Toronto are willing to push their budgets modestly to attain the home they desire. When it comes to factors that are influencing affordability in the region, low/declining housing supply, returning immigration numbers, and tightened lending rules are the most significant factors.
A popular trend in 2021 has been an influx of buyers moving to smaller towns outside of the city, including but not limited to Stratford, London and York Region neighbourhoods, because of the more affordable housing options found there. Some of the least affordable neighbourhoods in Toronto are High Park, The Junction and Bloor West.
Some alternatives to individual home ownership that have become relevant in Toronto since the start of 2021 include choosing to rent instead of buying, and using a portion of a newly purchased principal residence as an income property, to supplement the mortgage payments.
It is not expected that Toronto will see a cooling of house prices in the fall and winter of 2021, because of ongoing regional demand, continued limited supply, and the expectation that buyers will return to the city.
OTTAWA continues to be a good option for those seeking housing affordability in Ontario – particularly first-time homebuyers, despite the 20% uptick in prices from 2020 to 2021.
Ottawa condos have become the most popular type of property among first-time homebuyers in 2021, which has shifted from pre-pandemic, when the most popular home type among first-timers was freehold townhomes. However, given the price increase, buyers are now gravitating toward the condo market, with two-bedroom units being in higher demand. Typically, buyers in Ottawa are willing to push their budgets modestly to attain the home they desire.
When it comes to factors that are influencing affordability in the region, most likely to improve affordability are economic/employment conditions; continued interest in larger homes; business re-openings; and returning regional interest given the increase in recreational activity opportunities. On the flip-side, returning immigration numbers; low or diminishing housing supply; out-of-province/out-of-region buyers; and tightened mortgage lending rules could negatively impact affordability in the area.
The three most affordable neighbourhoods in Ottawa include Orleans, the Downtown Core and Nepean. The least affordable neighbourhoods are Manotick, Kanata and Stittsville, which offer more luxury properties with waterfront access.
Some alternatives to individual home ownership that have become relevant in Ottawa since the start of 2021 include pooling finances with friends or family to purchase a property, and buying a property that is lived-in by the owner while also being partially rented to supplement monthly payments.
Ottawa is still considered an affordable city and current homeowners enjoyed seeing their property values grow over the past year. However, first-time homebuyers have fears that they might not be able to afford to enter the market. Most properties in Ottawa are still seeing multiple offers due to limited inventory, but compared to the beginning of the year, properties are now selling closer to the listing price. It is not expected that Ottawa will see the cooling of house prices in the fall and winter of 2021, due to continued limited supply. The entry level price for home in Ottawa begins at $300,000.
ST. JOHN’S, NL has eclipsed Regina, SK as the most affordable place to buy a home in Canada in 2021. Single-detached homes continue to be the most popular type of property among first-time homebuyers in 2021, specifically three-bedroom homes in the $300,000-$400,000 price range. This trend has not shifted year-over-year but St. John’s has seen a much higher volume of purchases of this property type in 2021. Typically, buyers in St. John’s stay within their budget when purchasing a home.
When it comes to factors that are influencing affordability in the region, continued interest in larger homes and changing interest rates should help improve affordability. On the flip side, low or diminishing housing supply; tightened mortgage lending rules; and out-of-province/out-of-region buyers are believed to negatively impact affordability in the area.
The overall average price for the St. John’s metro area has increased a little over 6.5% in 2021. While the price increase is not as big as that experienced by cities such as Toronto and Vancouver, St. John’s market has been in a steady decline since reaching a peak in 2014, so this past year has restored confidence in the local real estate market. This region saw several multiple offer scenarios in the first half of 2021 and is expected to continue into the second half of the year.
Cabins became hot commodities in St. John’s in the spring, shifting the focus of buyers looking for a weekend home in cabins to smaller homes in smaller communities for a lower price point. It is expected that St. John’s house prices should stabilize in the fall and winter of 2021 due to increased supply, possible rising interest rates, tightening of mortgage regulations, and the shift to a post-COVID-19 life and buyers putting money elsewhere.
Most Affordable Neighbourhoods to Buy a Home
Short of exploring alternative solutions to find and achieve housing affordability in Canada, those who are willing to expand their boundaries can still find “hidden gem” neighbourhoods with homes at below-average prices. In a wider survey, RE/MAX Canada brokers and agents were asked to identify the most affordable neighbourhoods in the communities they serve. From approximately 300 survey submissions received between June 16 – 30,2021, some of the most affordable neighbourhoods topping the list include:
- Washington Park, Regina, Saskatchewan
- New Waterford, Cape Breton, Nova Scotia
- West Flat, Prince Albert, Saskatchewan
- Bayview, Sault Ste. Marie, Ontario
- Portage La Prairie, Central Plains, Manitoba
Meanwhile, in what are traditionally considered Canada’s most expensive cities to buy a home, this same survey also identified “relatively affordable” neighbourhoods where homes can be purchased at prices below the city-wide average. Some of these neighbourhoods include:
- New Westminster in Greater Vancouver, BC
- Penbrooke, Rundle and Dover in Calgary, Alberta
- Regent Park in Toronto, Ontario
- North End Hamilton, Ontario
- Hawthorne, Carlton Place and Vanier in Ottawa, Ontario
Click below for the complete list:
The Interest Rate Effect
The record-low interest rates that first appeared in 2020 have been a “double-edged sword,” presenting an exceptional opportunity for Canadians to get into or move up in the housing market, but also adding fuel to an already hot sector. Yet, with inflationary pressures starting to emerge, interest rates could rise soon, putting pressure on over-leveraged homeowners and slowing consumer demand.
“We’ve seen many buyers benefiting from low interest rates, which has created a sense of urgency to get into the market,” says Benjamin Tal, Deputy Chief Economist, CIBC. “However, we must caution that low rates are subject to inevitably rise, possibly as soon as 2022. We have to focus on the impact that this will have on the housing market and those who have recently purchased at a lower rate, as a one-per-cent increase would significantly raise the monthly carrying cost of a home.”
Based on broker insights and external data, as seen within the accompanying RE/MAX Housing Affordability Index, the average monthly mortgage amount across Canada ranges from approximately $950 to $4,268, depending on regional income levels, and a 20-per-cent down payment, amounting to an average percentage of Canadians’ monthly income from 11% to upwards of 50%. This is currently consistent with the majority of Canadians (72%) who feel comfortable allocating less than 50% of their household income toward housing costs, including mortgage payments.
However, concern over declining housing affordability in Canada and specifically the ability to afford a home in the next two years due to rising prices remains, with nearly half (48%) of Canadians sharing this sentiment. This concern significantly rises for younger Canadians (aged 18 – 34), with 71% expressing concern. Unsurprisingly, over half (60%) of this group agrees that a national housing strategy would cool the market and improve affordability.
“Creative solutions to achieve affordable home ownership will only take us so far, as will ‘stop-gap’ measures such as the mortgage stress test,” says Christopher Alexander, Chief Strategy Officer and Executive Vice-President, RE/MAX of Ontario-Atlantic Canada. “Without a national and locally supported strategy to significantly increase housing supply, prices will continue to rise. It shouldn’t be the burden of the next generation of homebuyers to figure out how to ‘get around’ the supply shortage and resulting affordability crisis when there are feasible, long-term solutions within reach.”
Buyer Incentives and Future Affordability Considerations
Amidst market challenges, the continued push behind the First-Time Home Buyer Incentive (FTHBI) has provided Canadians with an effective way to access a suitable down payment. Of those who recently bought their first home, 35% took advantage of the FTHBI; however, of those who did not, 31% were unaware of the incentive.
Incentives and regulations put in place to curb or create demand, while advantageous for some, do not address some of the other challenges currently at play that are impacting housing affordability in Canada.
“The common means of solving Canada’s real estate challenges, such as the introduction of the stress test, solely addresses demand rather than finding a way to ensure there are enough homes for all Canadians. Unfortunately, we have yet to tackle the real issue behind housing affordability in Canada, which is supply. We share the RE/MAX opinion that addressing supply must be our top consideration moving forward,” say Ash and Alexander.
Additional Report Highlights
In an analysis of housing affordability in Canada, the RE/MAX 2021 Housing Affordability Report finds that:
- St. John’s, Regina, Winnipeg, Edmonton, Ottawa, Calgary and Windsor rank as the top affordable regions (see index), based on average sale price, monthly household income, and percentage allocated towards a mortgage
- Those who have been able to afford homeownership (56% of Canadians) are significantly more likely to be aged 35+ (64%), live in a rural (70%) or suburban (60%) area, and earn $80k+ per year (74%).
- Of those who are not able to afford home ownership (41% of Canadians), they are significantly more likely to be aged 18-34 (60%), live in an urban area (48%), and make less than $40k per year (70%).
- When it comes to finding ways to own a home, Gen Z and Millennials claim that:
- 54% would consider buying a home in a different neighbourhood or region, just to be able to enter the housing market.
- 53% are only able to own a home with the help of their parents or other family members.
- 20% claim that owning a home has meant that they’ve had to move to another city within their province given affordability challenges.
- 17% have moved or purchased a home in entirely new provinces because it was more affordable than their previous place of residence.
- Canadians in Western Canada are more likely to want to get creative in their home-buying efforts (39%), as compared to Ontario and Atlantic Canadians (33%).
About the RE/MAX 2021 Housing Affordability Report
The RE/MAX 2021 Housing Affordability Report includes data and insights from RE/MAX brokerages. RE/MAX brokers and agents are surveyed on market activity and local developments. Average sale price is reflective of all property types in a region and varies depending on the region.
Leger is the largest Canadian-owned full-service market research firm. An online survey of 1,539 Canadians was completed between June 4-6, 2021, using Leger’s online panel. Leger’s online panel has approximately 400,000 members nationally and has a retention rate of 90 per cent. A probability sample of the same size would yield a margin of error of +/- 2.51 per cent, 19 times out of 20.