Navigating the Current Trends: An Analysis of the Canadian Housing Market in 2024

2024 will turn out to be a pivotal year for the Canadian Housing market. The ongoing affordability & availability crisis for homes in Canada has reached such proportions that it has become the centre of all political debates and discussions.

So here is deep dive into what the crisis is all about.

The housing crisis has arisen as the demand has meaningfully outstripped supply which has resulted in prices skyrocketing. The extent of price rise in the housing market & the lagging income levels can be gauged from the fact that it now takes 62.5% of household income to own a home in Canada as opposed to 30% recommended by financial experts.

So how are Canadians procuring funding to buy these houses?

Through Debt! The yawning gap in this graph is a reflection of the debt in the system that has been taken by homeowners to acquire properties. As of Sep 2023, Canada’s household Debt to Income was at 179%, one of the highest in the world.

It is important to understand the demand and supply dynamics in Canadian Real Estate Market which has resulted in the current situation.

Demand
The demand for housing has been driven by an increase in the population which grew by 2.7% last year. This increase in population has its roots in Canada’s immigration policy which invited people with open arms to give a boost to its economy & to support its aging population. This along with low mortgage rates post the 2008 financial crisis resulted in high demand for real estate.

Supply
Meanwhile, the supply has fallen behind demand massively with some experts stating that Canada needs 5.8 mn new homes by 2030 to tackle the affordability crisis.

There has been a slew of announcements made by the government to address the housing crisis from both the demand & supply side:
➡️  Ban on foreign ownership of Canadian Housing till Jan 1, 2027
➡️  Implementation of Vacant Home Tax @1% of the property value to tax properties that remain unoccupied for a significant portion of the year
➡️  $15 billion in new loan funding, starting in 2025-26 to build Rental apartments
➡️ Removal of GST for purpose-built homes like student housing, senior residences etc.
➡️  Repurposing more federal land for housing purposes  
➡️  Capping of international student permit applications to 3,60,000, a decrease of 35% from last year

Here are some numbers to understand the current situation in Canada:
➡️ In Vancouver, it would take 103% of income to own a house
➡️ Vacancy rates have collapsed from 7% in 2015 to 4 % currently
➡️ Canada’s price-to-income ratio, or the median price paid for property compared to average disposable income was 9.6, more than double the U.S. ratio of 4.2.
➡️ Canada’s “Household debt, loans & debt securities” as a proportion of the country’s GDP is at 102%, the highest in the G7 nations.

Hope you enjoyed this coverage of the Canadian housing crisis.