Despite this, many homebuyers are being priced out of the market
62 per cent of brokers surveyed in major Canadian cities are seeing buyers priced out of their market; however, 75 per cent of brokers agree that their market is undervalued
Based on average household income rates and monthly percentage allocated to housing, Canadians can afford homes
TORONTO and KELOWNA, BC, Feb. 12, 2020 /CNW/ - Despite the commonly held notion that housing in Canada is unaffordable, a majority of Canada's largest cities (75 per cent) are currently undervalued, according to the 2020 RE/MAX Housing Affordability Report.
The latest RE/MAX report examines a variety of affordability factors and how they impact Canadians' ability to buy a home, particularly first-time buyers.
"Despite the many challenges that continue to plague Canadians when it comes to the prospect of home ownership, such as record debt loads, there is promising opportunity across the country to enter the market," says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario-Atlantic Canada. "That said, the national housing market still has challenges to overcome, especially in centres like Toronto where demand is far outstripping supply, pushing prices up considerably as a result. We need to continue to push for an increase in housing supply for buyers and renters, but we have yet to see a comprehensive national housing strategy to help facilitate this shift."
A Leger survey conducted on behalf of RE/MAX reveals that surprisingly, only 38 per cent of Canadians claim that the high price of real estate is one of the biggest obstacles preventing them from buying a home. Also on their list was an insufficient salary level preventing them from saving for a down payment (26 per cent) and a fear of rising interest rates (17 per cent). Meanwhile, the majority of RE/MAX brokers (56 per cent) claim that low or shrinking inventory is a more common factor.
Emerging trends like co-ownership with friends and family have become common in hot markets such as Vancouver and Toronto, in order to overcome the hurdle of high housing prices. In regions such as Brampton, Edmonton and Ottawa, sharing a single-family home between two families, dividing the floors between them, or children seeking financial support from parents for down payments are becoming more common practices.
Of the regions surveyed, Winnipeg, Regina and Halifax are currently the most affordable markets, with average sales prices of $281,105, $301,473 and $319,071 respectively. Vancouver, Toronto and Mississauga are currently the least affordable regions in Canada, with average sales prices of $1,195,923, $883,520 and $760,005 respectively.
Avg. Sale Price* (2019)
Avg. Sale Price Estimate** (2020)
2019 Income Estimate***
Down payment amount (25%) ****
Monthly mortgage payment*****
% of monthly income for mortgage
When assessing the average mortgage amount and average regional income, percentages of monthly income allocated to mortgages fell under the recommended 30-32% maximum in many major Canadian cities
**2020 RE/MAX Housing Market Outlook Report
***Based on 2.7% increase (Source: Aon, Normanin Beudry)
****CIBC Mortgage Calculator
*****CIBC Mortgage Calculator (does not include creditor insurance)
"All levels of government must work together to find a solution to Canada's inventory issue, as the market will remain elusive for many otherwise," says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. "In the interim, working with experienced, professional agents can provide insight into creative and effective ways to navigate the current housing landscape."
In Toronto, factors such as the OSFI mortgage stress test, listing shortages, rising prices and saving enough for a down payment are cited as preventing buyers from purchasing property. Buyers in this region are primarily looking to purchase condominiums, but as one of Canada's least affordable housing markets, they continue to be priced out.
Despite recent price depreciation, Vancouver continues to experience affordability challenges. The mortgage stress test as well as government taxation policies are the leading factors preventing home ownership. Similar to Toronto, buyers are predominantly looking for condominiums, followed by townhomes as more affordable options.
Directly contrasting Vancouver is Regina, which is currently the most affordable city in Canada with a total average sale price of $301,473 and on average, only 12 per cent of monthly income required to carry a typical mortgage in the area. First-time buyers typically look for single-detached homes. Given the undervaluation of the market, co-ownership with friends and family has not been a typical practice. Buyers do not report being priced out of this market, which has seen Canada's most affordable housing prices for the past seven years.
Halifax, another highly affordable region, is also currently exempt from experiencing the affordability challenges seen in other regions across Canada. In this fairly valued market, buyers do not report being priced out of the market, struggling through the mortgage stress test, or needing to implement creative tactics to enhance affordability.
Other key highlights from the Leger survey include:
Two in 10 Canadians plan to purchase a home, with four per cent planning to buy in the next year
Excluding mortgage, three in 10 Canadians have consumer debt, averaging about $24,000
One-quarter (24 per cent) of Canadians without a mortgage have enough money for a down payment
Nearly half of Canadians (42 per cent) believe that housing affordability across the country would improve with government intervention, such as a national housing strategy
Of the seven in 10 (68 per cent) of Canadians who do not currently own a home and do not feel they will be able to afford one in their desired neighbourhood, barriers include:
High price of real estate (38 per cent)
Salary is not enough to save for down payment (26 per cent)
Fear of rising interest rates (17 per cent)
Level of household debt (15 per cent)
For the full 2020 RE/MAX Housing Affordability report, click here.
ABOUT THE 2020 RE/MAX HOUSING AFFORDABILITY REPORT The2020 RE/MAX Housing Affordability Reportincludes data from local boards and RE/MAX brokerages. RE/MAX brokers and agents are surveyed on trends, local development and features. The affordability ranking was determined by assessing the percentage of a buyer's monthly income, factoring in the forecasted 2020 average sale price per region and the forecasted 2019 average household income to calculate the percentage of income needed to carry a mortgage, assuming a down payment of 25%.
About Leger Leger is the largest Canadian-owned full-service market research firm. An online survey of 1600 Canadians was completed between January 3 – 6, 2020, using Leger's online panel, LegerWeb. Leger's online panel has approximately 400,000 members nationally and has a retention rate of 90%. A probability sample of the same size would yield a margin of error of +/- 2.5%, 19 times out of 20. Millennials are defined as Canadians aged 18 to 34 years of age.
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. Over 125,000 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. Such risks and uncertainties include, without limitation, (1) changes in business and economic activity in general, (2) changes in the real estate market, including changes due to interest rates and availability of financing, (3) the Company's ability to attract and retain quality franchisees, (4) the Company's franchisees' ability to recruit and retain real estate agents and mortgage loan originators, (5) changes in laws and regulations that may affect the Company's business or the real estate market, (6) failure to maintain, protect and enhance the RE/MAX and Motto Mortgage brands, (7) fluctuations in foreign currency exchange rates, as well as 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 filed with the Securities and Exchange Commission ("SEC") and similar disclosures in subsequent SEC filings. 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.