April 27, 2022
A standard home in Canada costs almost twice as much as a standard home in the United States.
The average home price in Canada reached a record $816,720 in February—or $638,144 USD—more than nine times the average household income, according to the Canadian Real Estate Association (via Fortune). Home prices in the U.S. over the same period climbed 27 per cent, reaching a record average of US$375,300 ($480,168 CAD)—an increase of 15 per cent year-over-year, according to the National Association of Realtors.
For comparison, the average cost for a home in Canada could fetch a two-bedroom in Odessa or Belleville, Ont., while the average price for home in the U.S. price can land two-bedroom homes in Spokane, Washington or Tampa, Florida.
Since 2020, Canada’s home prices have risen 30 per cent, a boom that’s been “nothing short of stunning,” Robert Hogue was quoted in Fortune as saying.
In Vancouver and Toronto, it would take the average household saving ten per cent of their income for 431 months and for 340 months, respectively, to put together a minimum down payment on a non-condo home, according to the National Bank of Canada.
Even if both those cities are excluded, the average Canadian home costs 21 per cent more than last year, Fortune points out.
Boosting supply was the centerpiece of the housing plan laid out in the Trudeau government’s spring budget. It said Canada has averaged around 200,000 new housing units annually in recent years and pledged to “double our current rate of new construction over the next decade.”
The plan quickly prompted skepticism. “Dollars to doughnuts this won’t happen, and not for lack of good intentions,” Robert Kavcic, senior economist with the Bank of Montreal, wrote in a note to investors.
Kavcic pointed out that housing completions are already running at the highest level since the 1970s, skilled labor in the building industry is scarce, and municipal governments will fight any effort to zone for more density.
In Canada’s least affordable city, Vancouver, the current situation is being made worse by the tight supply and rising construction costs, according to the latest report from CMHC. Vacancy rates in the city are expected to remain around 1 per cent while the unaffordability of houses is forecast to extend to the rental market.
“The main reason we may see average prices falling in the short run is a shift to more apartment sales rather than a broad-based price decline,” writes Braden Batch, a senior analyst in CMHC.
“We are unlikely to see a decline in the value of individual homes,” states Batch.
The sales-to-new listings ratio in Canada has little changed at 75.3%, well above long-term averages. CREA said about two-thirds of local markets were seller’s markets. Monthly sales are also more than 10,000 units higher than they’ve been in the last decade.
Another strand of the liberal government’s plan to address housing unaffordability, the two-year foreign-buyer ban, doesn’t apply to students, foreign workers or foreign citizens who are permanent residents of Canada.
“I don’t think prices are going to fall as a result, though I do think it takes away at least some of the competition in what is the most competitive market in Canadian housing history,” Simeon Papailias, founder of the real estate investment firm REC Canada, told Bloomberg. “I don’t think a two-year band-aid is going to have an impact on what’s a fundamental lack of supply.”
It’s hard to wrap my head around prices right now
The housing decline is pushing out even well-heeled buyers. For Johnny Chen, a promotion and a substantial salary increase was not enough to help him find a home in Vancouver’s white-hot housing market, he told Fortune.
Chen, who sits at the top income bracket, told the publication he’s been scrolling through listings in the city every day for six months to no avail. Even single-family homes priced at $3 million need “substantial renovation work,” he said, making him “trigger shy.”
“It’s hard to wrap my head around prices right now. Vancouver’s real estate market is a bit crazy,” he said.