Posted Thursday February 13, 2020


Canada's housing markets largely undervalued, according to report

Kitchener-Waterloo real estate prices have been on a steady incline in recent years, so it’s little surprise that the city’s housing market ranked #11 of 16 Canadian cities when it comes to housing affordability, according to the 2020 RE/MAX Housing Affordability Report. However, cost-conscious home hunters in search of a good deal can still find one in the communities of Country Hills, Lakeshore and Westvale, which have been named the most affordable neighbourhoods to buy a home in Kitchener-Waterloo.

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.

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.

"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)

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