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While many Canadians do have the credit scores required to purchase a home, it can be hard to come up with a down payment for a home that’s value has almost doubled in the last few years. It makes you wonder, will prices drop? Why is housing so hard to find? What is the cheapest place to live?
Is buying a house in Canada expensive?
While not everywhere in Canada has housing prices quite as high as the average, in general, Canada is one of the more expensive countries to live in and has one of the highest priced housing markets.
Average housing prices in Canada
While housing prices vary from province to province, the average cost of a detached home in Canada in 2022 is $665,850. This is a substantial amount of money and can seem quite unattainable for many. Of course, in order to buy this home, you aren’t going to need the full amount, but you will still need quite a bit.
If you were purchasing your first home at this price, you would need a down payment of around 5% which is $33,293. Not to mention you would need some funds on top of this for moving and closing costs. If you needed to put down a 20% down payment that would be around $133,172. Both of these are large amounts of money to come up with to invest in real estate, especially when just a few years ago it was only half the cost.
Average Home Cost in 2023
Since 2022, the average cost of a home has gone up. Currently, the benchmark price of a home in Canada is around $760,000. This is almost a difference of $100,000 from last year. This means a down payment of 5% will now be around $38,000 and a 20% down payment is around $150,000. This is a significant jump from last year's prices. Even with the current rise in interest rates, the market doesn’t show any significant signs of a slowdown.
Why are houses in Canada more expensive compared to the US?
In Canada and the US, depending on where you live, there are places with expensive homes and others with affordable homes. However, on average, a home in Canada is 40% more expensive than in the US. This has a lot to do with the market in Canada because rent in Canada is much cheaper than that in the US.
The most prominent factors affecting the housing prices in Canada are:
Supply and Demand
In Canada, there are more people trying to buy houses than the amount of housing available to purchase. This low housing supply can cause a bidding war between buyers and allows the seller to sell the home for more than the asking price. This process creates higher prices in the real estate market.
Low-Interest Rates
For a long time in Canada, interest rates were relatively close to zero percent. Low interest rates make it easier to purchase a home and makes people more likely to invest. The issue with this is that there are more buyers than sellers which also contributes to rising housing prices.
Only recently have the interest rates been raised by the Bank of Canada in order to combat the increased housing prices.
Foreign Buyers
Many investors in Canada have started purchasing homes to rent out or sell due to the low-interest rates. The price to rent ratio is a good investment as mortgage payments are often significantly smaller than rent payments in Canada. These foreign investors are also high value investors, investing in real estate is similar to investing in the stock market. This increase in buying of homes by foreign investors makes it difficult for Canadians to purchase in the market and makes the market more competitive.
Some places have started to charge a tax to those purchasing from different countries and not permanent residents in Canada. The foreign money not only makes it more difficult for Canadians to purchase a home, but it also drives up the housing costs, not just to purchase, but to rent as well.
The topic of why housing prices in Canada are so expensive is very common, especially on platforms like reddit. Ultimately though, it is agreed that supply and demand are a major issue as well as foreign buyers. Unfortunately, taking on these issues takes time and even when they are implemented, results are not seen overnight.
What is the average housing cost in each Canadian province?
Just like any country, some provinces are cheaper to live in than others. What is the most expensive province to purchase a home and what is the cheapest? Let’s see.
| Province | Average Housing Cost |
| British Columbia | $913,471 |
| Alberta | $401,706 |
| Saskatchewan | $286,000 |
| Manitoba | $321,504 |
| Quebec | $459,955 |
| Newfoundland and Labrador | $321,700 |
| PEI | $335,202 |
| Ontario | $887,290 |
| New Brunswick | $262,200 |
| Nova Scotia | $356,757 |
As you can see, the prices vary from province to province. It is important to remember that the prices even vary within the provinces but on average, BC is the most expensive province to purchase a home and New Brunswick is the cheapest.
How This Affects the Rental Market
With the increased cost of homes and mortgages, the rental prices need to be higher in order for landlords to be able to pay the bills on the home. This can be really difficult for Canadians, especially those in more expensive rental markets like Ontario and British Columbia. Just in the last year, rent has increased over 13% just in Ontario. In BC, it’s increased by over 18%. These prices are a combination of higher interest rates as well as higher housing prices.
Why are houses so expensive in some Canadian cities?
While the reason for high housing costs has a lot to do with location and population, it’s all about demand. Because of this, there are certain Canadian cities where it is very expensive to purchase a home. Each one of these cities has different reasons for this.
Ontario
Ontario is one of the most populated provinces in Canada. They have a diverse landscape, active city centers, new Canadian citizens, and many other factors. Just like the rest of Canada, Ontario has a shortage of homes compared to buyers. Even with all of the new construction, they just can’t seem to keep up.
Toronto
Toronto is a very popular Canadian city. It is more urban and closer to city centers. Since Ontario is already the second most expensive province in Canada, it makes sense that Toronto would be expensive to buy a home. The fact that it is so desirable drives the housing prices up with foreign investors and competitive buyers.
Vancouver
Vancouver is also a very expensive city to live in. It has the same issues that Toronto has being that they are both major cities, except that it is in British Columbia. The closer that you live to the city center, the higher the prices are, and they get more affordable the further away you move from the city.
Calgary
Lastly, Calgary also has very high housing prices and this is also due to supply and demand. Houses in this province often sell well above the asking price which continues to drive up prices. Ultimately, it is a popular city to live in that’s close to everything.
Are Canadian houses overpriced?
In short, yes. Canadian houses are overpriced by around 23% on average however this varies per province.
| Province | Percentage overpriced |
| Nova Scotia | 25.3% |
| PEI | 23.6% |
| Quebec | 17.7% |
| Ontario | 17.1% |
| New Brunswick | 2.4% |
| BC | 0.3% |
| Alberta | -22.7% |
| Saskatchewan | -21.7% |
| Newfoundland | -13.9% |
| Manitoba | -6.9% |
These numbers are calculated by trending the prices in each province. These numbers don’t mean that they aren’t expensive, it just means that there aren’t large jumps. There are also some provinces like Saskatchewan and Manitoba that seem to be undervalued.
Then there are other cities, mostly in Ontario, that are overvalued by over 100%. Honestly, it is hard to determine exactly how overvalued everything is. It ultimately comes down to how in-demand housing is and what people are willing to pay.
Cost of Condos in Canada
When it comes to the average price of a Condo in Canada, it really just depends on where you live. In Toronto, the average price of a condo is somewhere in the area of $725,000. That said, it was over $800,000 at the beginning of 2023.
If you are looking to purchase a condo in Vancouver, the average price is around $800,000, which is actually a little more expensive than in Toronto. However, if you look over to Alberta, they’re only around $265,000. This is quite the jump.
Will houses be affordable again in Canada?
It is difficult to determine if the housing prices will drop in Canada and by how much, but it is the goal. The Bank of Canada has been increasing interest rates in order to slow down the purchasing of homes and cool off the market. Because of this, prices have already dropped and are expected to drop by around 15% by the end of 2023.
However, the CMHC (Canada Mortgage and Housing Corporation) doesn’t expect prices to drop into an affordable range anytime soon and expect them to stay relatively expensive until at least 2024.
Who is buying all of the houses in Canada?
Ultimately, even though foreign buyers are an issue, there aren’t enough houses for sale for how many buyers there are in Canada. The main issue is a low supply and high demand. Whether you are a renter or a buyer, housing in Canada is difficult to find and expensive. Until this is no longer an issue, the cost of houses in Canada will most likely be an issue for a long time.
What is the cheapest place to live?
Just like we briefly mentioned above, New Brunswick is the cheapest province to live in Canada. Not only does it have affordable housing and cost of living it is also a beautiful place to live. It also happens to be a bilingual province where people speak both English and French.
The main reason that New Brunswick is so cheap to purchase a home is that it can be difficult to find employment. For this reason, many people who live here must commute to their jobs making it less popular to purchase a home here.
Is it still possible to purchase a home in Canada?
Yes. Even though it can be difficult, especially in today’s market, that doesn’t mean it is impossible. If you think you are ready to take the plunge and purchase a home, spring financial offers mortgages. We work with over 40 different banks and lenders and have agents able to help you through the process. Apply online or give us a call at 1-88-781-8439 to find out if you can get a mortgage today.
