The dream of owning a house is fading for many Canadians

It’s rough out there for those seeking to buy a house. In nearly every major market across Canada, home prices have been rising steadily while wages have been relatively flat. And with interest rates climbing, making it more expensive to borrow money, the dream of owning a home is fading for many Canadians. What does it take to own a home in today’s market? According to a report released by the Canadian Real Estate Association (CREA), the actual (not seasonally adjusted) national average home price was $709,218 — seasonally adjusted is $749,100 — in June 2023, up 6.7% from June 2022. The chart below breaks down the average costs of various property types as defined by CREA. As you’ll see, prices have been steadily climbing since 2005.

What does seasonally adjusted mean? Check out this explanation on Investopedia to learn more.

Rent is eating into savings

For many, the path to ownership often begins with renting. Until fairly recently, you’d be able to rent a place and have money left over that you could save to buy a property down the line. There appears to be little relief for renters as the average asking price of rent continues to rise across the country. According to Rentals.ca, the average asking rent in Canada hit a record high of $2,042 in June 2023, surpassing the previous record of $2,024 that was set in November 2022. What is driving up rents? While every region has its unique factors, some of the reasons rents are spiking include rising interest rates that is making it more difficult for current renters to take the plunge into home ownership, low inventory of homes available and being added to the market, and an increase in population - more people seeking housing.

Vancouver has long held down the top spot as the most expensive city in Canada to rent and the city continued to occupy the pole position in June 2023. Cities that are hotspots for new immigrants such as the City of Brampton in Ontario are also among the most expensive cities to rent. It posted a 23.5% year-over-year increase for a one-bedroom unit. In the chart below, we explore the top ten most expensive cities to rent based on one-bedroom and two-bedroom units. We use data from Rental.ca’s July 2023 Rent Report.

Pesky inflation and rising interest rates

To help curb inflation, the Bank of Canada has been increasing interest rates. It most recently increased interest rates to five percent in hopes it will cool down the economy and bring prices back to manageable levels. One of the consequences of higher interest rates, is that banks and other lenders tend to increase mortgage rates in line with interest rates which has made owning a home more expensive. Take the mortgage calculator below out for a spin to find out how various rates impact monthly payments and the total cost of the loan over the entire term of the mortgage. Many thanks to the folks at Ratehub for making this tool available.