The homeownership rate in Canada is declining steadily due to affordability challenges and supply shortages, leading more people into the rental market.
Re/Max Canada’s new report, The Nation of Renters, highlights the factors shaping the country’s housing landscape. First-time homebuyers are finding it difficult to enter the market, while renters are facing their own affordability and supply constraints.
Christopher Alexander, president of Re/Max Canada, describes affordability as the biggest barrier to homeownership nationwide. He notes that the average home price in most Canadian markets has more than doubled between 2006 and 2021, causing first-time buyers to struggle.
Alexander adds, “Some buyers, even with stable, well-paying jobs, find it nearly impossible to afford a home. The dream of homeownership is diminishing faster than their ability to save.”
Affordability and policy barriers
Home prices have risen significantly over the past two decades, making it harder to save for a down payment, especially in major Canadian cities. The OSFI mortgage stress test, which requires borrowers to qualify at rates two percentage points higher than the posted rate, remains a significant obstacle for many. Alexander argues that the stress test is hindering capable entry-level buyers.
In addition to mortgage qualification challenges, development charges in cities like Toronto have reached record highs. The Canada Home Builders’ Association Municipal Benchmarking Study found that development costs per low-rise unit in Toronto increased to $189,325 in 2022, up 21% from 2020 levels.
Housing supply and the “missing middle”
Re/Max points out a long-term supply shortage as a key factor in rising home prices. The country built 45,000 federally assisted affordable units in 1971, but it took nearly 25 years to build the same number of units between 1995 and 2019.
High land costs, zoning restrictions, and lengthy approval processes have slowed new construction. Many of the units entering the market are smaller condominiums targeting investors rather than family-sized housing.
The report states, “The decrease in first-time buyers has disrupted the housing market, which relies on entry-level buyers to support the move-up segment.”
The buy vs. rent debate
Many Canadians who would typically buy a home are choosing to remain in the rental market. According to Ratehub.ca, the cost of owning a $600,000 home in the Greater Toronto Area is comparable to renting a one-bedroom apartment in the city.
While rental prices are starting to soften in some areas, they remain high. Vancouver is currently Canada’s most expensive rental market, followed by Toronto and Halifax.
Market outlook and economic uncertainty
Economic uncertainty is influencing the market, with concerns about a potential recession in Ontario and Quebec due to recent U.S. tariff announcements. Population growth in Canada continues to outpace new housing supply, putting pressure on the housing market.
The report suggests potential solutions such as relaxed lending policies, longer amortization periods, and incentives for first-time…
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