Shifting Market Trends as Homeownership Dreams Fade for Many Canadians

A recent report from Re/Max Canada, titled The Nation of Renters, reveals that the Canadian homeownership rate is steadily declining. Mounting affordability challenges, stringent lending policies, and persistent supply shortages are pushing more Canadians into the rental market—a trend that has significant implications for both homebuyers and rental housing providers.

Affordability Challenges Hamper First-Time Buyers

Rising home prices are at the forefront of the issue. Since 2006, the average cost of a home in many Canadian markets has more than doubled, making it increasingly difficult for first-time buyers to save for a down payment. “Affordability is by far the greatest barrier to homeownership from coast to coast,” noted Christopher Alexander, president of Re/Max Canada. He added that even those with steady, well-paying jobs find it “near impossible” to keep pace with the rapid rise in home prices.

Compounding these challenges is the Office of the Superintendent of Financial Institutions’ (OSFI) mortgage stress test, which requires borrowers to qualify at rates two percentage points above the posted rate. This measure, along with record-high development charges in major cities, has further discouraged many capable buyers. For instance, development costs for low-rise units in Toronto soared to $189,325 in 2022—a 21% increase over 2020—while other markets, including Hamilton, Vancouver, Ottawa, Calgary, and even Halifax, have experienced similar upward trends.

Supply Shortages and the “Missing Middle”

A longstanding shortage in housing supply continues to strain the market. Although Canada constructed 45,000 federally assisted affordable units in 1971, it took nearly 25 years to match that output between 1995 and 2019. High land costs, strict zoning regulations, and prolonged approval processes have slowed the pace of new construction. Moreover, much of the new supply consists of smaller condominium units, primarily aimed at investors rather than families, contributing to what many experts refer to as the “missing middle” in housing.

The Shift from Buying to Renting

As more Canadians find themselves priced out of the buying market, the rental sector is absorbing the overflow. In the Greater Toronto Area, for example, the monthly cost of carrying a $600,000 home—with a 10% down payment and a five-year fixed rate at 4.1%—is approximately $2,665. This figure is comparable to the monthly rent for a one-bedroom apartment in the region. Across the country, rental prices remain robust, with Vancouver leading as Canada’s most expensive rental market (averaging $2,512 for a one-bedroom), followed closely by Toronto at $2,360 and Halifax at $2,030.

Economic Uncertainty and a Growing Population

Economic factors such as trade uncertainties and potential recession fears—particularly in Ontario and Quebec—add further complexity to the housing market. While recent negotiations have provided a temporary reprieve, experts warn that prolonged economic instability could depress housing demand even further.

At the same time, Canada’s population growth has consistently outpaced the development of new housing. With significant double-digit growth recorded in major cities like Vancouver, Calgary, and Toronto between 2021 and 2024, the demand for rental properties is expected to remain strong.

Looking Ahead

For Royal York Property Management, these evolving market dynamics underscore the importance of providing quality rental options that meet the needs of a diverse clientele. As more Canadians find the dream of homeownership increasingly out of reach, the rental market is set to play an even larger role in the country’s housing landscape. Our commitment remains firm in delivering exceptional service and well-maintained properties to help navigate these challenging times.

Source: Real Estate Magazine

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