Housing Affordability in Canada 2022 Report
Today we’re going to talk about RE/MAX’s recent Housing Affordability in Canada 2022 Report. As you all know, the Canadian real estate market has been a wild ride for the past couple of years. Home prices across Canada surged through the pandemic and have only recently begun to moderate.
People moving to Canada were looking for affordable homes and having a hard time finding them. Those of you living in Canada were trying to find a home that fit your budget.
Now we find ourselves in a situation that’s a little different. Prices are moderating as interest rates go up, but affordable housing remains in short supply. Limited available housing is a problem that existed long before the pandemic.
AFFECTS ON HOUSING MARKET?
Across Canada, and especially in larger urban markets, there has been a shortage of all kinds of housing for years. Until there is a national strategy to address the issue, potential buyers struggle with both low supply and changing economic conditions.
Even with less explosive increases, housing prices remain a barrier for 43% of potential homebuyers who want to enter the market in their area. Other post-pandemic conditions affecting the ability to buy a home include rising cost of living, a volatile market, and increased interest rates.
But people still want to own a home. No matter the market conditions, there is a powerful desire to put down roots. Investing in a home is something Canadians are eager to do when the time is right in their lives.
In the current market, however, over 60% of survey respondents indicated that rising interest rates are putting their home buying plans on hold. Nearly 70% can’t afford a home in their neighbourhood of choice.
Does that mean everyone is giving up the search for a home? Not at all. People are willing to make sacrifices to purchase a home they can afford. What do we mean when we talk about sacrifices?
In this context, sacrifices include things like location and type of home. In fact, location was what people were most willing to change. 64% chose it as one of the three sacrifices they would make to purchase an affordable home.
About half of those willing to look at alternative locations wanted to stay within 200 kilometres of their original choice. 38% were willing to move as far away as they needed to in order to find the perfect affordable home.
Others were willing to rethink the type of home they wanted to purchase. Some more creative solutions to the affordability problem included co-ownership with family or friends or renting a portion of the home to help meet the costs.
WHAT IS THE CAUSE?
So what is it that fuels high housing prices in Canada? Part of the huge surge in home purchases during the pandemic was a reflection of very low interest rates. The resulting ability of more people to enter the market put strain on an already tight supply and prices soared.
As interest rates rise and inflation hits 40-year highs, there is less demand and prices are moderating accordingly. This marks a return to a healthier, more sustainable market. But Canada faces other factors that keep prices high.
Limited supply is the longest standing issue affecting housing affordability. Added pressures include pandemic supply chain problems, a shortage of skilled labor, and increased immigration.
Most Canadians (70%) want the government to develop a national housing strategy to address housing affordability. Their confidence in their ability to afford a home is decreasing as short supply lingers.
Regional Housing Affordability
We all know that Canada’s housing market differs drastically from place to place. We live in a vast, diverse country with big cities and lots of small towns. Average home prices vary from $302,949 in Brandon, Manitoba to $1.3 million in Vancouver and $1.2 million in Toronto.
It’s easy to see why relocation is at the top of the sacrifices homebuyers are willing to make. Moving from British Columbia to Manitoba could save you a million dollars! Even less drastic changes make a big difference.
Here in Ottawa the average home price is $811,653. A move to Sudbury lowers the average home price to $498,939.
Do you want to stay in Ottawa? Prices even vary dramatically from neighbourhood to neighbourhood. Ask us about Rockland, Herongate, South Keys, or Bell’s Corners.
You’ll find the same in every province. While average prices can seem completely out of reach, choosing the right neighbourhood, a suburb, or a small town can help homebuyers enter the market.
The Bottom Line
The bottom line of the recent housing affordability report from RE/MAX is that prices are moderating from pandemic highs, but there are still barriers to entry for many potential homebuyers.
Inflation, higher interest rates, and few homes for sale are making it difficult for buyers to enter the market. After two long years of double digit pandemic housing price increases, people are feeling less confident that they will find a home in their budget.
Until there is a national housing strategy, buyers will continue to look for acceptable sacrifices. Some will choose a different neighbourhood, a suburb, or even a different province. Others will choose a smaller home or a condo to enter the market.
Still others will continue to get creative and co-own or rent part of their home. Barriers exist, but they aren’t insurmountable. Talk with us about your goals as a potential homeowner. What are your priorities?
Your perfect affordable home always evolves as you look at the houses on the market. You may find that you don’t care as much about a breakfast nook as you thought. Or you may discover a neighbourhood you’ve never visited. You may even find a small town that ticks all the boxes.
Housing affordability is a national problem. Finding an affordable home is an individual problem. Looking at the big picture is helpful, and it’s good to be aware of national trends.
But as you start looking for homes, talk to us about making this market work for you and your budget. Living in Ottawa is all about opportunities. Your new home may be around the next corner.
