Canada’s Most Affordable Cities for Homebuyers

Written by Posted On Thursday, 13 January 2022 00:00

A new report by RBC Economics says housing affordability in Canada has reached its worst level in 31 years. Yet, across the country there are many markets that are still considered affordable.

“Homebuyer demand is supercharged and inventories are near historical lows in virtually every market, creating intense competition between buyers” and pushing prices up, says RBC senior economist Robert Hogue. “These conditions have widely eroded housing affordability in the past year.”

But despite the gloomy outlook, there are still parts of the country that RBC says are affordable, based on its measure of the share of income a household would need to cover homeownership costs.

While affordability in B.C. and Ontario worsened, “the relative picture generally improved elsewhere, especially in Atlantic Canada and the Prairies. These trends are poised to keep driving some Ontario buyers toward more affordable regions of the country,” says Hogue.

Indeed, Statistics Canada reports that in the first six months of this year, Ontario lost more than 17,000 residents to other provinces. All four Atlantic Provinces saw an increase in interprovincial migration for the first time since 2009/2010, with migration at or near record levels, says Statistics Canada. 

B.C. saw the biggest gain in migration during those six months, despite Vancouver being the most expensive housing market in the country.

Earlier this year, Re/Max surveyed Gen Z and millennial homeowners and found that 17 per cent have moved to or purchased a home in a different province because it was more affordable than their previous home. Another 20 per cent of those surveyed said they had to move to another city in their province.

This is a trend that will continue, says Hogue. He says many buyers “will cope by driving further (including all the way to another province) until they qualify, or scale down the property they’re going for, or both. Because of already challenging conditions and the fact that rising interest rates will push up homeownership costs more in Canada’s priciest markets, we expect buyers in Vancouver, Toronto, Victoria, and, to a lesser extent, Ottawa and Montreal to be under the most pressure to reset their expectations.”

The Re/Max report listed St. John’s, Winnipeg, Edmonton, Calgary and Windsor, Ont. as the top affordable regions in its report, based on average sale price, monthly household income and percentage allocated towards a mortgage

RBC says most of Atlantic Canada and the Prairies are “reasonably affordable” and are likely to remain so in the year ahead. But all but one city has seen affordability weaken.

“St. John’s, Newfoundland was the only major market in Canada where affordability didn’t deteriorate in the third quarter,” says Hogue. But the market saw “sky-high” activity in 2021, with sales on pace to beat the previous record by more than 40 per cent, he says, which could result in upward pressure on prices.

St. John, N.B. is the second-most affordable market tracked by RBC and is undoubtedly being checked out by Ontario and Quebec residents who have been shut out of their markets.

In Alberta, “affordability remains generally good in Calgary despite some erosion recently. Again, the inventory of houses available for sale is dropping and “prices are rising at a solid clip” but “those increases have been a fraction of gains recorded in Ontario, B.C. and parts of Quebec and Atlantic Canada,” says RBC. It’s a similar story in Edmonton, where buyers still face “historically favourable conditions.”

In Saskatoon, Regina and Winnipeg, sales have been setting records but RBC says it’s a positive affordability picture.

Smaller markets that fare well on the affordability scale include Charlottetown, Moncton, Fredericton, Trois Rivières, Sherbrooke and Red Deer.

Unfortunately, RBC believes that things are going to get worse.

“Home prices re-accelerated amid strong demand and scarce inventories this fall. And borrowing costs are poised to get more expensive. Fixed mortgage rates have gone up since summer and we expect the Bank of Canada to start hiking its overnight rate next spring, which would drive variable rates higher. The knock on affordability will be felt across the country.”

RBC says the share of income a household would need to cover average homeownership costs stands at 64.3 per cent in Vancouver, 61.9 per cent in Toronto, 40.7 per cent in Montreal, 40 per cent in Ottawa, 32.8 per cent in Calgary and 28.5 per cent in Edmonton.

Housing affordability is one of the hottest topics in Canada these days. Ontario’s provincial government recently formed a Housing Affordability Task Force made up of industry representatives and non-profit housing advocacy members.

The Liberal government is looking at going forward with some of its recent election promises. These include the Underused Housing Tax, a one-per-cent tax on homeowners who leave their homes unoccupied. Vancouver also has an empty homes tax and Toronto’s City Council just voted to implement one as well.

Other federal housing initiatives under consideration include an “anti-flipping tax” and bringing an end to “blind bidding” when real estate transactions are being negotiated.

However, in a recent fiscal update, Finance Minister Chrystia Freelance said it would take years of work to make the housing market more affordable.

Rate this item
(0 votes)
Jim Adair

Jim Adair is editor of REM: Canada's Real Estate Magazine, a business publication for real estate agents and brokers. He has been writing about Canadian real estate, home building and renovation issues for more than 30 years. You can contact Jim at jim@remonline.com.

www.remonline.com/

Realty Times

From buying and selling advice for consumers to money-making tips for Agents, our content, updated daily, has made Realty Times® a must-read, and see, for anyone involved in Real Estate.