After last year’s cooldown in the Canadian real estate market, prices have been edging higher on solid demand, tight supply, and expectations regarding lower interest rates. Today, the average price for a home in one of the world’s hottest housing industries is a little bit more than $700,000. Despite widespread attention the issue has been given by all three levels of government, housing affordability continues to be challenging. While all the focus has been on prices in places like Toronto and Vancouver, many smaller markets have become expensive.

Are prospective homebuyers doomed? Not at all! According to the RE/MAX 2024 Canadian Housing Market Outlook report, 41 percent of markets are expected to regain balance, and more than one-quarter (28 percent) are anticipated to favour sellers. Put simply, there are plenty of opportunities in Canada’s real estate sector to find a home that suits your budget.

Affordable Canadian Real Estate, Defined

Before we get into the “where” of the most affordable Canadian real estate, let’s take a look at what it actually means.

Traditionally, housing affordability is defined as households spending 30 percent or less of their total income on shelter. In recent years, however, a wide range of studies have discovered that many homeowners and renters are allocating more than 30 percent of their earnings to keeping a roof over their heads.

But where are the places in Canada that offer some semblance of affordability? Using the average six-percent mortgage rate, let’s examine ten affordable housing markets in Canada.

10 Most Affordable Places to Buy Canadian Real Estate

1. Red Deer, Alberta

• Average Home Price: $378,775

• 20% Down Payment: $75,755

• Mortgage Amount: $303,020

• Monthly Mortgage Payment: $1,938

• Average Monthly Income (before taxes): $8,666

• % of Monthly Income Allocated to Mortgage: 22.4 percent

2. Regina, Saskatchewan

• Average Home Price: $319,800

• 20% Down Payment: $63,960

• Mortgage Amount: $255,840

• Monthly Mortgage Payment: $1,636

• Average Monthly Income: $7,032

• % of Monthly Income Allocated to Mortgage: 23.3 percent

3. Brandon, Manitoba:

• Average Home Price: $340,000

• 20% Down Payment: $68,000

• Mortgage Amount: $272,000

• Monthly Mortgage Payment: $1,740.

• Average Monthly Income: $7,034

• % of Monthly Income Allocated to Mortgage: 24.7 percent

4. Edmonton, Alberta

• Average Home Price: $431,387

• 20% Down Payment: $86,277

• Mortgage Amount: $345,110

• Monthly Mortgage Payment: $2,269

• Average Monthly Income: $11,931

• % of Monthly Income Allocated to Mortgage: 19 percent

5. Thunder Bay, Ontario

• Average Home Price: $350,000

• 20% Down Payment: $70,000

• Mortgage Amount: $280,000

• Monthly Mortgage Payment: $1,791

• Average Monthly Income: $7,026

• % of Monthly Income Allocated to Mortgage: 25.5 percent

6. Saskatoon, Saskatchewan

• Average Home Price: $339,800

• 20% Down Payment: $67,960

• Mortgage Amount: $271,840

• Monthly Mortgage Payment: $1,739

• Average Monthly Income: $8,620

• % of Monthly Income Allocated to Mortgage: 20.1 percent

7. St. John’s, Newfoundland

• Average Home Price: $342,500

• 20% Down Payment: $68,500

• Mortgage Amount: $274,000

• Monthly Mortgage Payment: $1,753

• Average Monthly Income: $8,552

• % of Monthly Income Allocated to Mortgage: 20.5 percent

8. Moncton, New Brunswick:

• Average Home Price: $305,100

• 20% Down Payment: $61,020

• Mortgage Amount: $244,080

• Monthly Mortgage Payment: $1,561

• Average Monthly Income: $5,954

• % of Monthly Income Allocated to Mortgage: 26.2 percent

9. Calgary, Alberta

• Average Home Price: $603,700

• 20% Down Payment: $120,740

• Mortgage Amount: $482,960

• Monthly Mortgage Payment: $3,090

• Average Monthly Income: $11,743

• % of Monthly Income Allocated to Mortgage: 26.3 percent

10. Winnipeg, Manitoba

• Average Home Price: $430,099

• 20% Down Payment: $86,019

• Mortgage Amount: $344,080

• Monthly Mortgage Payment: $2,263

• Average Monthly Income: $9,015

• % of Monthly Income Allocated to Mortgage: 25.1 percent

Average home prices based on local real estate association boards

Average monthly income based on Statistics Canada

Monthly mortgage payment based on six percent mortgage rates

The Good News and the Bad News About Affordable Housing

According to a recent RBC report, the Canadian housing market has never been less affordable. In the fourth quarter of 2023, a median household would need to spend 63.5 percent of its income to carry a mortgage on the typical home; this is up 1.7 percent from the previous quarter. By comparison, during the 1990s housing bubble, the figure was 57 percent.

Affordability erosion was concentrated in the usual places, such as Vancouver (106.3 percent), Toronto (84.8 percent), and Victoria (80.2 percent). But while one of Canada’s largest banks sees affordability improving, the improvement might be tepid.

“Under our base case scenario, the share of an average household income needed to cover ownership costs would only fall to mid-2022 levels by 2025,” said Robert Hogue, assistant chief economist at RBC, in the April 2024 report. “Meaningfully restoring affordability will likely take years in many of Canada’s large markets. In this context, we expect the housing market’s recovery to be slow at first, before gaining momentum as interest rate cuts accumulate.”

That said, a new by the National Bank of Canada suggests that there has been “widespread” improvement nationwide on the housing affordability front.

According to the financial institution’s Housing Affordability Monitor, housing affordability, measured by the mortgage payment as a percentage of income for the median home price, was seen in each of the ten markets in the first three months of 2024.

For instance, in Toronto, mortgage payments as a percentage of income tumbled 5.7 percentage points to 82.4 percent. Or, as another example, mortgage payments in Vancouver declined 8.9 percentage points to 95.7 percent.

The chief hurdle in the Canadian real estate market is housing stocks. The housing supply deficit reached an all-time high in the first quarter of 2024 and has been in freefall since 2021.

“As a result, price dynamics for both purchases and rents should remain skewed to the upside in the current acute housing shortage,” the report stated.

So, what were the three most affordable markets based on the bank’s data? Winnipeg (31.7 percent), Edmonton (32.2 percent), and Quebec (32.7 percent).

Courtesy RE/MAX Canada

Taylor Swift is not only a powerhouse in the music industry but also a significant cultural influencer whose impact resonates far beyond the stage. Her Eras Tour, which has grossed a record-breaking $1 billion to date, has delighted fans worldwide and significantly impacted the economies of the cities that hosted her performances, including the housing markets.

Key Findings

Cities hosting Taylor Swift concerts saw home prices rise by an average of 2.1 percent, a substantial increase compared to the national average growth of 0.5 percent during the same period​. This was seen especially in Atlanta, where it increased by 8.8 percent following a concert​.

Taylor Swift’s concerts significantly boosted local economies through increased spending on accommodations, food, activities, and concert tickets. Concert-goers reportedly spent nearly $1,000 on average in the host cities​​.

Approximately one in five concert-goers surveyed expressed an interest in relocating to the city they visited for the concert. The most notable interest was seen in Houston, where 45 percent of visiting fans considered moving there​.

Taylor Swift’s Economic Impact on Host Cities

Taylor Swift’s Eras Tour has had a remarkable economic impact on the cities that hosted her performances. The presence of her concerts has led to significant increases in local housing markets, with an average home price rise of 2.1 percent in these cities, a stark contrast to the national average of only 0.5 percent.

In Atlanta, the increase in average home prices soared to 8.8 percent. Tampa experienced the second-largest boost from the Eras Tour with an 8.2 percent increase in home prices, while Glendale, Arizona, saw a 6.5 percent rise. Both cities actively embraced Taylor Swift and her tour. For instance, during the tour’s stop, Hillsborough County, which includes Tampa, temporarily rebranded itself as “Swiftsborough”; Glendale similarly renamed itself “Swift City.”

Beyond the real estate market, the tour brings substantial direct spending into these local economies. On average, fans spend nearly $1,000 during their visit, with expenditures spread across accommodations, dining, activities, and concert tickets. Specifically, this spending includes about $208 on accommodations, $121 on local activities, $145 on dining, and a significant $452 on concert tickets. This influx of spending provides a considerable boost to local businesses and injects a substantial amount of capital into the economy.

The heightened visibility and popularity of the host cities have led to sustained interest and investments long after the concerts have ended. The cities have remained desirable destinations for both tourism and permanent relocation, as surveys by Architectural Digest indicate that one in five concertgoers consider moving to the cities they visited for the shows. In Houston, this number increases to an astounding 45 percent.

Long-Term Effects for Canadian Tour Stops

What does this mean for Canada? Businesses in Vancouver are already preparing for the influx of visitors, with expectations of downtown areas being fully occupied during the December 6-8 concert dates. Local officials and business leaders predict that the fans will not only fill hotels but may also increase demand for short-term rentals, potentially driving up rental prices. This could lead to increased property values as investors and homeowners capitalize on the heightened demand​.

Toronto, having been announced earlier as a Canadian stop for the tour on November 14-23, anticipates similar economic impacts. Such a high-profile event can elevate interest in the city’s real estate, as visitors may consider long-term investments or relocation, influenced by their positive experiences during their stay. This increased interest can lead to a rise in home prices and rental rates, contributing to overall real estate market buoyancy.

Both cities are already preparing for challenges such as accommodation capacity and regulatory impacts on short-term rentals, which could further affect the real estate landscape. However, local officials express confidence in managing these challenges, emphasizing that the benefits of hosting such events extend beyond the immediate economic boosts to foster long-term growth and stability in their housing markets.

The economic and cultural impacts of Taylor Swift’s Eras Tour on host cities illustrate a broader phenomenon wherein major entertainment events can significantly influence local economies and urban landscapes. As the tour moves into Canada toward the end of 2024, Vancouver and Toronto are expected to demonstrate the same boost in local housing prices and urban economy.

Courtesy RE/MAX Canada

Let’s be honest: There is a lot of uncertainty in the current Canadian real estate market. Are home prices climbing, rising, or stagnating? Where will mortgage rates be by the end of the year? Will economic conditions improve as 2024 progresses? Indeed, there are many variables that buyers and sellers need to think about as they navigate through all the noise in the housing sector.

Research has shown that Canadian households understand that buying a home, whether a single-family house or a condo, is one of the best financial decisions you can make in your life. This is why young households are often encouraged to set their sights on home ownership, no matter what the current housing landscape looks like.

Put simply, now could be a terrific time to buy a house for the first time. Let’s comb through the various ways that buying a home in today’s climate could be advantageous for you and your family.

Is it a Good Time to Buy a House for the First Time?

Here are four factors to show that now is a good time to buy a house for the first time:

Mortgage Rates Will Come Down Soon

Unless Canada’s inflation rate dramatically reaccelerates, interest rates will come down soon. The Bank of Canada (BoC) has already said as much, though monetary policymakers are monitoring the real estate market out of precaution. That said, the consensus among economists and market watchers is that the central bank will soon pull the trigger on a quarter-point rate cut and slash rates by a full percentage point by the year’s end.

What does this mean for homebuyers? Mortgage rates will follow suit. Since August 2023, the conventional five-year fixed mortgage lending rate has been above six per cent. If the monetary authorities have successfully vanquished inflation in the Canadian economy and move ahead with loosening monetary policy, the cost of borrowing a mortgage could gradually slide below six per cent. This could potentially save buyers thousands of dollars over the course of the term, particularly if borrowers shop around for the best terms and conditions.

Government Incentives

All three levels of government have put forward incentives to foster more home buying among first-time buyers. While some of these programs might not result in substantial savings for households residing in hot real estate markets like Toronto and Vancouver, they can undoubtedly provide significant savings for people living in Manitoba or Nova Scotia.

Here is a breakdown at the federal level:

Home Buyers’ Plan (HBP): Canadians are eligible to tap into their registered retirement savings plans (RRSPs) to buy a home. Borrowers can withdraw up to $60,000.

Tax-Free First Home Savings Account (FHSA): Borrowers can make tax-deductible contributions of up to $8,000 per year for a lifetime maximum of $40,000.

In addition, Ottawa has implemented other tax credits and rebates to help address housing affordability challenges.

Across the country, provinces have established a treasure trove of grants and incentives to help first-time homebuyers confidently trek the real estate market. In Ontario, for instance, there is the Land Transfer Tax Refunds for First-Time Homebuyers. In British Columbia, there is the First-Time Home Buyers’ Program. Or, in New Brunswick, officials have established the Home Ownership Program.

At the municipal level, there are various initiatives to construct more housing.

Ultimately, all of these programs will help first-timers take the leap into home ownership and potentially get more of the home features that they desire, such as more square footage or their desired location.

Brace for a Soft Landing?

Inflation has impacted millions of Canadians. While the consumer price index (CPI) is still hovering close to three percent – above the central bank’s two-per-cent target rate – disinflation has been prevalent, and the increases have not been as fast and furious. As for the rest of the economy, conditions have been relatively slow. The last time the monthly GDP rate hit one percent was in August 2020.

According to S&P Global, GDP growth in Canada will continue to be sluggish in the coming months, with the real GDP rate coming in at 0.9 percent in 2024. TD Bank forecasts that long-term growth is anticipated to decelerate to around 1.8 percent annually. “This will be driven by solid population and labour force growth, while productivity growth lags behind,” the bank stated in its report.

The good news? Canada might avert a recession, which would also suggest that the employment situation does not deteriorate. Of course, this is good news for first-time homebuyers as they can have the confidence that their labour situation will not worsen, forcing borrowers to eat into their savings until they find other employment opportunities.

While economic conditions can change on a dime, many market observers are confident that Canada could accomplish a soft landing, a situation whereby growth is intact, labour market remains solid, and inflation is eradicated.

Stagnating Price Growth

Housing market conditions have stabilized in Canada. In other words, the real estate industry has not witnessed the violent price swings that occurred a few years ago. For instance, the Canadian Real Estate Association (CREA) reported that the MLS® Home Price Index (HPI) dipped 0.3 percent monthly in March and was up just 0.7 percent year-over-year. While the national average home price is higher than the pre-crisis level – in March, it was nearly $699,000 – the acceleration has slowed.

All About Supply

In the end, supply will define the Canadian real estate market in the coming years. With Canada’s population only growing amid rising immigration levels, demand will undoubtedly be baked into the cake. But will the country respond to these conditions and start building more supply? There is growing optimism that home construction plans by the government and the industry’s response to the pressing need for millions of new homes over the next decade will help bolster the Canadian real estate market. The future is bright, and other homebuyers realize a hopeful future is in the realm of possibility.

Courtesy RE/MAX Canada

The Bank of Canada today reduced its target for the overnight rate to 4¾%, with the Bank Rate at 5% and the deposit rate at 4¾%. The Bank is continuing its policy of balance sheet normalization.

The global economy grew by about 3% in the first quarter of 2024, broadly in line with the Bank’s April Monetary Policy Report (MPR) projection. In the United States, the economy expanded more slowly than was expected, as weakness in exports and inventories weighed on activity. Growth in private domestic demand remained strong but eased. In the euro area, activity picked up in the first quarter of 2024. China’s economy was also stronger in the first quarter, buoyed by exports and industrial production, although domestic demand remained weak. Inflation in most advanced economies continues to ease, although progress towards price stability is bumpy and is proceeding at different speeds across regions. Oil prices have averaged close to the MPR assumptions, and financial conditions are little changed since April.

In Canada, economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7%, first-quarter GDP growth was slower than forecast in the MPR. Weaker inventory investment dampened activity. Consumption growth was solid at about 3%, and business investment and housing activity also increased. Labour market data show businesses continue to hire, although employment has been growing at a slower pace than the working-age population. Wage pressures remain but look to be moderating gradually. Overall, recent data suggest the economy is still operating in excess supply.

CPI inflation eased further in April, to 2.7%. The Bank’s preferred measures of core inflation also slowed and three-month measures suggest continued downward momentum. Indicators of the breadth of price increases across components of the CPI have moved down further and are near their historical average. However, shelter price inflation remains high.

With continued evidence that underlying inflation is easing, Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points. Recent data has increased our confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain. Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians.

Information note

The next scheduled date for announcing the overnight rate target is July 24, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

Courtesy The Bank Of Canada

MAY 2024 HOUSING MARKET UPDATE

June 3, 2024

In a market that continues to show resilience, May saw a total of 3,092 resale home sales. While this figure is nearly one per cent below last year's record high, it is 34 per cent higher than long-term trends for the month. The pullback in sales was primarily driven by declines in lower-priced detached and semi-detached homes, where there was limited supply choice compared to last year.

"Although new listings have increased, much of this growth is in higher price ranges for each property type," said Ann-Marie Lurie, Chief Economist at CREB®. “Our strong economic situation has supported sales growth in these higher price ranges. However, this month's sales could not offset the declines in the lower price ranges due to a lack of supply choice."

New listings in May reached 4,333 units, almost 19 per cent higher than last year. This increase in new listings compared to sales caused the sales-to-new listings ratio to drop to 71 per cent, supporting a modest year-over-year inventory gain. Despite this, inventory levels remained nearly half what we typically see in May, with most gains driven by homes priced above $700,000.

While inventories did improve this month, conditions continue to favour sellers with one month of supply. Several districts continue to report less than one month of supply, while the City Centre reported the highest supply-to-sales ratio at one and a half months. Seller market conditions drove price growth across all districts in the city. The unadjusted total residential benchmark price in May reached $605,300, nearly one per cent higher than last month and 10 per cent higher than last May. 

Detached

The gain in detached sales for homes priced over $700,000 was not enough to offset pullbacks across the lower price ranges, as year-over-year sales declined by seven per cent. At the same time, new listings rose enough to cause the sales-to-new-listings ratio to drop to 68 per cent, supporting inventory growth. However, inventory levels for homes priced below $600,000 continued to fall, accounting for only 13 per cent of the detached market.

With just over one month of supply, the detached market continues to favour the seller, and prices continue to rise. As of May, the unadjusted benchmark price reached $761,800, over one per cent higher than last month and 13 per cent higher than prices reported last year. Prices improved across all districts, with the most significant year-over-year gains occurring in the most affordable districts. 

Semi-Detached

The year-over-year decline in sales did not offset earlier gains, as year-to-date sales rose by nearly 11 per cent. Like the detached sector, we have also seen improved levels of new listings come onto the market, causing the sales-to-new listings ratio to drop to 72 per cent and driving some gains in inventory levels. 

Nonetheless, the market continues to favour the seller with one month of supply. The persistently tight market conditions continue to drive up prices. The benchmark price reached $678,000 in May, over one per cent higher than last month and 13 per cent higher than last May. 

Row

May reported 540 sales, a gain over last year that has contributed to the 16 per cent year-to-date rise. At the same time, new listings also rose, supporting a gain in inventory levels. Inventory levels have declined for properties below $400,000, but the gains reported for higher-priced row properties were enough to support overall inventory gains. 

With a sales-to-new-listings ratio of 78 per cent and a months of supply below one month, conditions continue to favour the seller, driving further price growth. In May, the benchmark price reached $462,500, nearly two per cent higher than last month and over 19 per cent higher than last year’s levels.

Apartment Condominium

Demand for affordable homes continues to drive growth for apartment condominium-style homes. May sales continued to rise, contributing to the year-to-date record high with a 19 per cent gain. This was partly possible thanks to gains in new listings preventing a further drop in inventory levels. While inventory levels are similar to last year, the gains for products over $300,000 offset the steep declines for lower-priced homes.

With a months of supply of just over one month, conditions still favour the seller, and prices continued to increase compared to last month's and last year’s levels. Year-over-year price gains exceeded 30 per cent in the North East and East districts, with the lowest price growth occurring in the City Centre at 13 per cent.

REGIONAL MARKET FACTS

Airdrie

A boost in new listings compared to sales helped support a gain in inventory this month. However, with only 208 units available, levels are still half what we traditionally see in the market in May. Detached homes accounted for nearly 70 per cent of all the inventory in Airdrie, with half of the detached supply priced below $700,000.

While Airdrie remains a relatively affordable alternative to Calgary for consumers, benchmark prices continue to rise over last month's and last year's levels. Benchmark prices ranged from $289,000 for apartment-style homes to $651,000 for detached properties.

Cochrane

This month's 132 new listings were nearly matched with the 130 sales, causing the sales-to-new-listings ratio to rise to 98 per cent and inventories to decline. 

The persistently tight market conditions continue to drive further price growth. The total residential benchmark price rose by over one per cent compared to last month and 10 per cent over last year. The most significant price growth occurred for apartment-style homes, which reached $304,900. Detached home prices rose to $667,700 in May. 

Okotoks

Inventory levels in Okotoks continued to remain exceptionally low in May. With only 84 units in inventory, levels are 55 per cent lower than what is traditionally available in the market. While new listings improved slightly in May, the 100 new listings were met with 75 sales, keeping the sales-to-new listings ratio elevated at 75 per cent. 

With one month of supply in the town, it is no surprise that we continue to see upward pressure on home prices. In May, the unadjusted residential benchmark price rose by one per cent over last month and is over eight per cent higher than last year’s. Prices ranged from $262,500 for an apartment condominium to $699,600 for a detached home.

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