Home prices keep many Canadians up at night

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In the survey, 71% of Canadian adults expressed anxiety about the nation's rising home prices, including 40% who said they're "very worried" and 31% who described themselves as "somewhat worried."

The concerns aren’t unfounded. The national average sale price for a home rose 38.4% from May 2020 to May 2021, pricing many Canadians out of local housing markets around the country.

With the supply of homes sputtering while demand isn't letting up, home values likely won't come back down anytime soon.

Infographic shows that people throughout Canada are worried about rising home prices.
MoneyWise Canada / YouGov survey

Jodi Martin, an associate professor at York University, lives with her partner in Toronto. Martin hoped they could jump on a dip in prices at the start of the pandemic and buy a home.

But after a year of searching, she says she’s given up, calling a home purchase “an unaffordable dream” for her household. Because her partner is self-employed, they had to base what they could afford solely on Martin's income.

"It really quickly became clear that nothing was affordable," she says. "The first mortgage broker I spoke to actually wouldn’t even walk me through a preapproval process because he was like, ‘You’re never going to be able to do anything in this situation.'"

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Where the degree of worry is highest

Toronto city skyline, Ontario, Canada
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In Ontario, Canada's most populous province — where the average sale price of a home now sits at $866,307, up 37.6% from a year ago — a full 75% of those surveyed indicated they were either somewhat or very worried about the escalating prices for housing.

Nationwide, the level of concern was especially acute for those ages 25 to 34, with 78% in that demographic reporting they worry over the rising cost of buying a home.

Infographic shows that Canadians of all age groups are worried about rising home prices.
MoneyWise Canada / YouGov survey

None of this surprises Eddy Cocciollo, president of Dominion Lending Centres (DLC), one of the country’s leading mortgage companies. He says that while Canadians are understandably worried about home prices, they still have options.

"If I want to buy a house, of course I’d like to buy it for cheaper," says Cocciollo. "Everybody wants to spend less. [But the important question is] what are you comfortable with in terms of affordability?"

He’s confident that, despite rising prices, many anxious would-be homebuyers could in fact purchase a house if they made some compromises, like looking in a different market or being willing to rely on some external support.

“What I’m seeing right now is that people are finding the down payment, mostly from the 'bank of Mom and Dad,' and [their] incomes are servicing that debt,” says Cocciollo. "So if affordability exists, then who cares about price?"

But if you haven’t got family money to rely on, or your credit score is less than impressive, your options are more limited.

What Canadians think should happen

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By law, you have to put down 20% on properties valued over $1 million. With the average selling price topping $1.1 million in the Greater Toronto Area, it's no mystery why Martin, the York University professor, is feeling despair over what it takes to buy a home these days.

For her to even consider restarting a search, home prices would have to fall significantly.

The MoneyWise survey asked: What, if anything, should happen to address the country's rising real estate prices? Respondents could choose more than one potential remedy.

Slightly more than half (51%) said the government should intervene and build a much larger number of affordable public housing units.

About a third (32%) said Canada should use taxes and other measures to try to hold down price increases. And, 18% wanted to see the Bank of Canada respond by raising interest rates.

Only 25% felt nothing should be done and that the market should be allowed to take its course.

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What the experts think

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Christopher Alexander, chief strategy officer at Re/Max Integra, says government intervention generally doesn't go well.

Still, he says the challenge facing Canada’s housing market is driven by a lack of inventory — and maybe there is a role for government to play.

“There is no national housing strategy that can address [the thin supplies of homes] right now,” says Alexander. “I think Canadians need to accept that drastic measures need to be taken to meet the challenge."

One measure Alexander advocates would be to have all levels of government work together to increase developers' capacity to build. This could include: approving more developments; and subsidizing or incentivizing developers to build more affordable housing, as well as larger condos that can accommodate families rather than just couples.

The trouble, says Cocciollo says, is that any government action now would be too late to steer the country out of trouble it's currently facing.

“I agree with measures to help tamper down prices," he says, "but without either interest rates rising or more stock in the markets, it's going to be hard to see prices slowing down."

What's a buyer to do?

Close up of woman using calculator, writing notes.
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Cocciollo points out that while housing prices continue to rise, interest rates are at an all-time low.

But Canadians shouldn’t expect that to last much longer, as the Bank of Canada recently indicated it could start raising rates again late next year, which could pull mortgage rates up as well.

That means if you’re hoping to become a homeowner, you’ll want to act fast and take out your loan before down payments of $200,000 (already common in Vancouver and Toronto) become the norm in more markets across Canada.

But, Alexander cautions, don't buy outside your means. He emphasizes it’s critical you take on only as much debt as you can realistically manage.

Housing observers see indications prices may be softening a bit as buyers take a breather after a busy spring season. And, with the pandemic nearing its end, there’s hope listings will increase as people who put off selling during COVID-19 get their plans back on track.

While the process of searching for a home was a disappointment for Jodi Martin, she does admit COVID-19 has offered her and her partner a perfect opportunity to boost their savings.

Martin says she's happy to stay where she is for now and continue to set aside money every month, so one day she'll be able to afford the home she wants.

“I think we’re just content to sort of wait it out,” she says. "It’s like we’re playing chicken with the market — we’ll see who caves first."

Survey methodology

The MoneyWise survey was conducted online by YouGov from June 16-22, 2021, using an interview administered to individuals who have agreed to take part in surveys. The total sample size was 1,032 adults.

The results have been weighted and are representative of all Canadian adults ages 18 and older.

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About the Author

Sigrid Forberg

Sigrid Forberg

Reporter

Sigrid is a reporter with MoneyWise. Before joining the team, she worked for a B2B publication in the hardware and home improvement industry and ran an internal employee magazine for the federal government. As a graduate of the Carleton University Journalism program, she takes pride in telling informative, engaging and compelling stories.

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