Will Real Estate Be Affordable in Canada in the Next 5 Years?

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3 weeks ago

Short answer is most likely “no” but let’s dwell into the details.

In the past few years, Canadians have witnessed the housing market grow more and more expensive, making it nearly impossible to own a house. Which factors are to blame? Inflation? A lack of housing supply? Foreign real estate investors? While we may never pinpoint the exact cause of this mispricing, we are certainly aware of its consequences. Given the rapid increases in home price inflation over the past couple of years, many Canadians have been left to wonder whether the market will ever change, allowing real estate to become affordable in the next 5 years.

The Royal Bank of Canada predicted that the real estate market will remain challenging for a few years as the demand for housing continues to outpace supply, especially in bigger cities like Vancouver or Toronto. The Canadian Real Estate Association said: “Months of inventory for single detached homes numbered 0.4 at the end of the first quarter of 2024, down from the 1.5 months recorded at the end of the first quarter of 2023.” about Toronto real estate market, one of the most vibrant and well-known cities.

Limited housing supply in Toronto’s RE market has made owning a house there extremely expensive . In 2022, the federal government released a policy banning foreign property ownership . It is set to expire on January 1st of 2025. However, the government is planning on extending this policy until January 1st, 2027. Even though this seems like a good idea to slow down the economy across the nation for the first 2 years, once it is lifted, the market will pick up where it left off. This time with an even stronger and wealthier waves of foreign home buyers.

It is unclear whether the foreign buyer ban will have an immense impact on the RE market, so far, it does not seem to have solved the affordability problem being faced. One trend we have seen as a result is urban to suburban migration. Aspiring home buyers have begun to consider buying real estates in cities that are lesser known, and therefore more affordable. Mike Power, Chair of the New Brunswick Real Estate Board, said home buyers are ready to “get off the sidelines and into the market” as they come to terms with the higher interest rate when the province hit the third-highest sales total in the month of April this year.

Over a 5-year horizon, it is difficult to predict with certainty that the real estate market will become affordable, however, the housing market will get better and potential home buyers will have opportunities to better position themselves.

Since March of 2022, the Bank of Canada overnight lending rate has steadily increased, making the already-demanding mortgages harder to pay off, and even harder to get. By 2023, only 10% of British Columbia households and 22% of Ontario households had sufficient income to purchase a condo home. To put this into perspective, the average price for a single family home in Ontario this year is well-above $900,000 while the average salary is around $55,000 yearly. By the time an average Canadian is able to save enough money for a 20% down payment, the house price would have already exponentially increased.

Another trend to consider is seasonality. During the spring and summer months, there are many more listings compared to the colder seasons. This provides more house supply, and attracts a greater number of investors to the market. It also helps home sellers to be more choosy when deciding on a buyer for their property. This can lead to bidding wars, and overall price appreciation, making the house hunt even more difficult for buyers. On the other hand, sellers who choose to list their property during the more weather-affected months tend to have fewer potential buyers, which reduces price competition and increases affordability. Buyers can consider buying houses during fall and winter to optimize their odds of finding an affordable asking price.

Factors Influencing Future Affordability

The greatest factor impacting home affordability in the GTA is supply. There is fundamentally a lack of housing supply, and at the same time, a rapidly growing demand for housing. Immigration and migration rates, to large urban centres like Toronto, have continued to rise over the past couple of years, and have completely outpaced the rate of home construction. There are not enough homes to house everyone who needs one, and so prices will remain sky-high until this imbalance is addressed.

Macroeconomic factors such as inflation may also play a role. Given the potentially recessionary environment we will enter over the next few years, many expect that the BoC will begin cutting rates shortly. As this happens, many Canadians who have been patiently waiting on the sidelines are expected to re-enter the housing market. This may unfortunately lead to a surge of competition, and an increase in home prices.

Whether the future is bright or bleak , Clover Mortgage can help you stay on top of the market. With personalized advice from our expert team of brokers, you can arm yourself with the knowledge you need to secure your dream home (and mortgage). Contact us today to get started with a free consultation!


What is the outlook for real estate in Canada in 2024?

It appears that the real estate market in Canada will still be rough for 2024. The high demand and limited houses available, along with high interest rate, will still be a big concern. Even though there are signs that the interest rate “hikes” are slowing down, however, the affordability and competition for houses will still be present.

Is 2024 a good time to buy a house in Canada?

The housing market is in high demand currently, with lots of demand and few supplies. If home buyers compete for a piece of the market, they will most likely overpay. There is a risk of buy high, sell low if home buyers jump in right now.

Will house prices keep rising in Canada?

House prices in Canada will keep on rising every day; as long as there is population growth and immigration, house prices will continue to rise.

In conclusion, there is no guarantee that real estate in Canada will become more affordable, not to mention the chance that it can be even more expensive than it already is. However, home buyers should consider ways to provide themselves a better position to buy real estate. Whether it is waiting to buy houses during weather-affected seasons, get pre-approved mortgages, avoid big cities like Toronto or Vancouver, or wait for the right economical moment like when interest is down to buy.

Steven Tulman
Written By Steven Tulman
“Making the process of getting a mortgage an easy and enjoyable experience for every Clover Mortgage client!”