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Of those Canadians who are considering alternative ways to become homeowners, over half (54 per cent) are Millennials and Gen Z.
15 per cent 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, and St. John's tops the list this year with an average selling price at $307,619.
Forty-five per cent of Canadians agree that a national housing strategy would improve their ability to own a home.
TORONTO and KELOWNA, BC, July 20, 2021 /CNW/ - According to the RE/MAX 2021 Housing Affordability Report, one in three (33 per cent) Canadian homebuyers are exploring alternative options to help them get a foot into the housing market. These include renting out a portion of a primary residence (21 per cent), pooling finances with friends or family to purchase a home (13 per cent) or living with like-minded neighbours in a co-op/shared living arrangement (seven per cent).
According to a Leger survey commissioned by RE/MAX, 42 per cent of Canadians said the high price of real estate was a barrier to entry into the market. This is up four per cent from 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 affordability problems, which are 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 to affordability for many would-be buyers, according to the Canadian consumer survey, include a shortfall in salary (26 per cent); the fear of rising interest rates (18 per cent); the fear of being "house poor" (18 per cent); lack of steady full-time employment (16 per cent); current levels of household debt (11 per cent); and the mortgage stress test (11 per cent).
Affordability across Canada
Canada's two largest cities, Toronto and Vancouver, have struggled with significant affordability challenges mainly due to low supply and high demand due to low interest rates. Unsurprisingly, both cities have remained least affordable year-over-year, according to RE/MAX's 2021 Housing Affordability Report.
In Western Canada on the other hand, there are some unique outliers when it comes to affordability. 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.
The most affordable neighbourhoods in Calgary are Northeast and Southeast Calgary, with entry level homes beginning at $350,000, and overall average prices in 2021 ranging from $266,868 - $588,541 depending on property type. In Edmonton, the most affordable area is Central North where a two-bedroom bungalow with full basement approximately 900SF would sell between $160,000-$190,000. The most affordable neighbourhoods (Central North) Alberta Avenue offer entry level homes beginning at $160,000 and overall average prices between $175,000-$225,000.
Similarly, in Atlantic Canada, markets such as St. John's that have experienced modest average price increases (approx. 6.5 per cent since 2020) as compared to larger cities like Toronto and Halifax are offering affordable options for buyers looking to purchase a home without feeling financially over-extended. Current average sales prices across all property types in St. John's sit at $307,619 – far below the average residential home price in Canada.
Despite an uptick in prices from 2020 to 2021 of approximately 20 per cent ($465,903-$561,701), Ottawa continues to be a good option for affordability seekers as well, particularly first-time homebuyers.
Short of exploring alternatives to be able to buy a home, those who are willing to expand their boundaries can still find "hidden gem" neighbourhoods with below-average prices across Canada. According to a wider survey of RE/MAX Canada brokers and agents, some of the most affordable neighbourhoods 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 housing markets, RE/MAX brokers and agents have identified relatively affordable neighbourhoods that offer homes priced below the city-wide average, such as:
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
View and download the full list of most affordable neighbourhoods in Canadian cities and towns here: http://download.remax.ca/PR/2021AffordabilityReportNeighbourhoods.pdf
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, while 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-$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 per cent to upwards of 50 per cent. This is currently consistent with the majority of Canadians (72 per cent) who feel comfortable allocating less than 50 per cent of their household income towards housing costs, including mortgage payments.
However, concern over the ability to afford a home in the next two years due to rising prices remains, with nearly half (48 per cent) of Canadians sharing this sentiment. This concern significantly rises for younger Canadians (aged 18 – 34), with 71 per cent expressing concern. Unsurprisingly, over half (60 per cent) 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 per cent took advantage of the FTHBI; however, of those who did not, 31 per cent were unaware of the incentive.
Incentives and regulations put in place to control or entice demand, while advantageous for some, are thought to not yet address some of the other affordability challenges that are currently at play.
"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 still 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 highlights from the 2021 RE/MAX Housing Affordability Report:
St. John's, Regina, Winnipeg, Edmonton, Windsor rank as the top more 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 per cent of Canadians) are significantly more likely to be aged 35+ (64 per cent), live in a rural (70 per cent) or suburban (60 per cent) area, and earn $80k+ per year (74 per cent).
Of those who are not able to afford homeownership (41 per cent of Canadians), they are significantly more likely to be aged 18-34 (60 per cent), live in an urban area (48 per cent), and make less than $40k per year (70 per cent).
When it comes to finding ways to own a home, Gen Z and Millennials claim that:
Canadians in Western Canada are more likely to want to get creative in their home-buying efforts (39 per cent), as compared to Ontario and Atlantic Canadians (33 per cent).
About the 2021 RE/MAX Housing Affordability Report
The 2021 RE/MAX 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. Regional summaries with additional broker insights can be found at RE/MAX.ca.
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.
About the RE/MAX Network
RE/MAX was founded in 1973 by Dave and Gail Liniger, with an innovative, entrepreneurial culture affording its agents and franchisees the flexibility to operate their businesses with great independence. Nearly 140,000 agents provide RE/MAX a global reach of more than 110 countries and territories. RE/MAX is Canada's leading real estate organization with more than 20,000 Sales Associates and over 900 independently-owned and operated offices nationwide. RE/MAX, LLC, one of the world's leading franchisors of real estate brokerage services, is a subsidiary of RE/MAX Holdings, Inc. (NYSE: RMAX). With a passion for the communities in which its agents live and work, RE/MAX is proud to have raised millions of dollars for Children's Miracle Network Hospitals® and other charities. For more information about RE/MAX, to search home listings or find an agent in your community, please visit www.remax.ca.
Forward looking statements
This report includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "believe," "intend," "expect," "estimate," "plan," "outlook," "project" and other similar words and expressions that predict or indicate future events or trends that are not statements of historical matters. These forward-looking statements include statements regarding housing market conditions and the Company's results of operations, performance and growth. Forward-looking statements should not be read as guarantees of future performance or results. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks and uncertainties include (1) the global COVID-19 pandemic, which has impacted the Company and continues to pose significant and widespread risks to the Company's business, the Company's ability to successfully close the anticipated reacquisition and to integrate the reacquired regions into its business, (3) changes in the real estate market or interest rates and availability of financing, (4) changes in business and economic activity in general, (5) the Company's ability to attract and retain quality franchisees, (6) the Company's franchisees' ability to recruit and retain real estate agents and mortgage loan originators, (7) changes in laws and regulations, (8) the Company's ability to enhance, market, and protect the RE/MAX and Motto Mortgage brands, (9) the Company's ability to implement its technology initiatives, and (10) fluctuations in foreign currency exchange rates, and those risks and uncertainties described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and similar disclosures in subsequent periodic and current reports filed with the SEC, which are available on the investor relations page of the Company's website at www.remax.com and on the SEC website at www.sec.gov. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Except as required by law, the Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.
SOURCE RE/MAX Canada
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