The Unaffordable Housing Crisis in Canada: Forecasts and Expectations for 2025
Nearly half (45%) of Canadians are concerned about their housing affordability. Previous research has shown that more than one in five Canadian households were living in unaffordable housing. This means they spend more than 30% (the target you should fall below for housing cost) of their income on shelter.
As an example, let's say you earn $80,000 per year or $6,666 per month. That means your total housing costs should be no more than $1,866.00 ($6,666 x 0.28 = $1,866). If you live in Canada - some provinces are better or worse, this is just not the reality we are living in today and haven’t been living in for some time now. When we sit down with clients, many are very concerned that their children and grandchildren will not be able to afford their own home, and with good reason.
Having said that, with the continued rate cuts we are experiencing, what does this mean for the housing market for 2025? We have pulled together some research to determine what the experts are predicting for this year.
Amid what has been a slow few months for real estate in some parts of Ontario, experts are now trying to reassure panicky sellers and developers that the market is set to heat up– however, this will continue to mean a higher price for buyers, if they’re correct.
Royal LePage released their forecast last month, and in it they are predicting a 10 per cent hike in home prices in the Toronto area this year.
The Canadian Real Estate Association has also released a forecast for each province and Canada as a whole. Based on the trends in 2024, impending interest rate cuts and other factors, the trade group is calling for the cost of the typical home to increase in every single province by as little as 2 per cent in P.E.I. to 7.9 per cent in Alberta. While Alberta will see the largest increase, Ontario and BC were not far off, based on their forecast.
The CREA predicted that the average price of a house or condo in Ontario will rise by 0.7 per cent by the end of last year (2024) to hit $876,965 — still an escalation in a lifeless market that should be driving prices downward — before climbing 3.9 per cent in 2025, reaching $911,150.
The association also claims that the pandemic market we saw will return, with 7.3 per cent more homes finding new owners in the province in 2025 after a 2.2 per cent spike in this figure by the end of last year. Nova Scotia and BC are set to see similar increases in the volume of home sales, but Ontario is expected to be the front-runner for sales by CREA.
CREA also noted that since their last forecast in April 2024, their expectations around interest rate cuts have been dialed back. Supply has built up by more than they were anticipating as a large number of sellers came to the market with properties for sale in the spring. Despite this, to no surprise “buyers remained on the sidelines” according to the report. It adds that “lower interest rates are still expected to gradually bring buyers back into the market going forward,” though not as strongly as the association had previously thought. This forecast is proving that either buyers are quietly waiting for additional rate cuts to enter the market, or housing has just become unaffordable for so many and renting has become the popular choice.
Check out the chart below to see how much you need to earn to buy a home in Canada.
Data in the chart is based on a mortgage with 20% down payment, 25-year amortization, $4,000 annual property taxes and $150 monthly heating. Mortgage rates are the average of the Big Five Banks’ 5-year fixed rates in September and October 2024. Average home prices are from the CREA MLS® Home Price Index (HPI).