The rising cost of real estate in Canada is prompting hopeful homebuyers across the country to rethink their strategy for getting a foot up on the property ladder.
One in three Canadian purchasers — 33 percent — say they are exploring alternative options to get into the housing market, according to new insights published today in the RE/MAX 2021 Housing Affordability Report. Leger, a market research firm, conducted an online survey for the report, gathering responses from 1,539 Canadians between June 4th and 6th.
The alternative options buyers are weighing include renting out part of a primary residence (21 percent), combining finances with friends or family to buy a property (13 percent), and establishing a shared living or co-op arrangement with like-minded neighbours (seven percent).
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“It’s promising to see Canadian buyers deploying their ingenuity to be able to buy a home, but we must address the urgency of the underlying affordability problems, which are predominantly systemic,” said Elton Ash, Regional Executive Vice President at RE/MAX of Western Canada, in the report.
The survey results found that 42 percent of Canadians considered the high price of real estate a barrier into the housing market, a sentiment that is up four percent compared to last year. The report noted that this slight uptick is “surprising” considering the level of price growth housing markets have experienced this past year.
The 2021 Housing Affordability Report cited a number of factors that are acting as affordability barriers to hopeful homeowners, including a shortfall in salary (26 percent), the lack of steady, full-time employment (16 percent), current levels of household debt (11 percent), and the mortgage stress test (11 percent). Fears around rising interest rates and being “house poor” also made the list, with both factors affecting 18 percent of respondents.
Those surveyed who have been able to afford homeownership (56 percent) were more likely to be over 35 years of age (64 percent), reside in a rural (70 percent) or a suburban (60 percent) area, and earn over $80,000 a year (74 percent). Those who could not afford homeownership (41 percent) tended to be between the ages of 18 and 34 (60 percent), live in an urban community (48 percent), and make less than $40,000 a year (70 percent).
Among prospective homebuyers, Millennials and Generation Z were found to be the most likely to contemplate alternative communities or financing options “to keep affordability in play,” said the report.
Fifty-four percent of those surveyed in these generations stated that they would consider purchasing a home in a different neighbourhood or region just to enter the market. Meanwhile, 17 percent of Millennial and Gen Z respondents say that they have moved or purchased a home in a new province because it was more affordable than where they lived previously. More than half of purchasers in the two generations (53 percent) said that they are only able to own a home due to the assistance of their parents or other family members.
Almost half of those surveyed (48 percent) expressed concerns around the ability to afford a home within the next two years as a result of rising prices. Canadians between the ages of 18 and 34 years old shared the most concern about this issue (71 percent), with 60 percent of this age group agreeing that a national housing strategy would help to improve affordability.
“Creative solutions to achieve affordable home ownership will only take us so far, as will ‘stop-gap’ measures such as the mortgage stress test,” said Christopher Alexander, Chief Strategy Officer and Executive Vice-President at RE/MAX of Ontario-Atlantic Canada, in the report.
“It shouldn’t be the burden of the next generation of homebuyers to figure out how to ‘get around’ the supply shortage and resulting affordability crisis when there are feasible, long-term solutions within reach,” he added.
When it comes to affordable markets across Canada, Toronto and Vancouver continued to rank as the country’s least affordable cities, an issue that has been created by low supply and high demand fueled by low interest rates, the report said. Here, the average home sale price between January and June in 2021 hit $1,089,536 and $1,172,858, respectively, according to RE/MAX’s Housing Affordability Index.
On the opposite end of the spectrum, St. John’s Metro was deemed much more affordable, with an average sale price of $307,619 so far in 2021.