Over the past few weeks, we have been gathering some of the most compelling indicators in the Canadian Real Estate sector.
We don't have a crystal ball - but understanding where the market is & has been is the best way to project where we think the market is going to go in the future.
It's essential to ignore media sensationalism and let the fundamentals help guide your perception of the market - in other words, let the numbers do the talking. It's especially important to get the housing market figures from reputable resources, such as the Canadian Real Estate Association (CREA).
Real Estate & Canadians Net Worth
The Average Canadian net worth is tied up overwhelmingly in Real Estate
- The Median net worth for economic families in Canada was $329,900 in 2023 [¹].
- By comparison, the median net worth of a family in the USA is $192,900 [²].
- Real estate makes up 52% of the average household net worth of $967,202 and average mortgage debt at $180,000.
- While the median net worth varies significantly by province, ranging from $185,000 in New Brunswick to $434,500 in Ontario, and 40% of homes in Canada are mortgage-free [³].
- As of June 2024, there are approximately 1.7 million millionaires in Canada, which accounts for about 5.6% of the adult population [⁴].
Over the past 5 years the Toronto Housing market has held up better than the stock market
- As of June 2024, Canadian households experienced a notable increase in net worth, which rose by $548 billion (3.3%) to reach $16.9 trillion in the first quarter.
- This growth was primarily driven by strong performance in equity markets, with the S&P 500 Index increasing by 10.2% and the S&P/TSX Composite Index rising by 5.8%.
- Additionally, the value of residential real estate rebounded, adding $213 billion (2.6%) to household wealth after two consecutive quarters of decline.
- Household liabilities also increased, albeit at a slower pace of 0.3%, marking the slowest quarterly expansion since early 2023.
- The debt-to-income ratio declined to 176.4%, indicating that income growth is outpacing debt growth, which is a positive sign for household financial health [⁵].
Despite housing construction at all-time highs, it's not enough to meet demand
- In 2024, it is estimated that around 75,000 new condo units are expected to be completed in Toronto alone [⁶].
- As of January 1, 2024, the population reached approximately 40,769,890, reflecting an increase of 1,271,872 people compared to the previous year, marking a growth rate of 3.2% [⁷].
- By 2073, older adults (aged 65 and older) could make up between 21.9% and 32.3% of the total population, while the percentage of children (0 to 14 years) is projected to decrease [⁸].
The Canadian Housing Market has averaged a 6.11% yearly appreciation over 15 years
- The Teranet-National Bank Composite National House Price Index indicated that from December 2022 to December 2023, the composite index rose by 3.0%. However, this growth followed a period of correction, with prices having declined earlier in the year [⁹].
- For example, Alberta's benchmark price increased by 8.1% year-over-year, while Ontario experienced a decline of 4.5%.
- These numbers are based on the median benchmark price for all of Canada across all property types. Some regional markets and asset classes performed better, and others performed worse.
Vacancy rates are at all-time lows
- The national vacancy rate for purpose-built rental apartments in Canada's primary rental market reached a record low of 1.5% in 2023, the lowest level since CMHC began recording a national vacancy rate in 1988 [¹⁰].
- Among major markets, Calgary and Edmonton saw the sharpest rise in rents in 2023. Calgary now rivals Toronto as the second tightest major rental market in the country [¹¹].
- The average vacancy rate in the secondary rental market, or rented condominium market, across 17 CMAs surveyed by CMHC fell from 1.6% in 2022 to 0.9% in 2023 [¹²].
- Ontario has the third lowest vacancy rate in Canada at 2%.
As of 2023, Canada's nominal GDP is approximately $2.14 trillion CAD
- The real GDP for Canada reached $1.62 trillion CAD in 2022, which is adjusted for inflation.
- The estimated GDP growth rate for Canada in 2023 is 0.5% for the first quarter, with expectations of reaching 0.8% by the end of that quarter.
- Historically, Canada's GDP annual growth rate has averaged around 3.03% from 1962 to 2024.
Market Performance: Appreciation
15-Year Market Performance
- The national benchmark home price, which measures the price of a "typical" home, was $724,800 in July 2024, a 0.8% monthly decrease and down 4.3% year-over-year [¹³].
- Nationally, home sales reached 38,626 in July 2024, a seasonally adjusted 0.7% decrease from the previous month and a 3.2% decline from the previous year.
- New listings were up 0.9% month-over-month, while active listings were up 22.7% year-over-year.
- By comparison, the median home sales price in the US increased from $232,500 in 2005 to $324,500 in 2020 - representing a 39.6% increase in 15 years or 2.25% per annum (note: the US was hit considerably harder by the 2008 financial crisis).
Provincial Contributions
- Ontario was the largest contributor to Canada's economic growth in 2023, adding 0.60 percentage points to the national GDP increase.
- British Columbia contributed 0.23 percentage points, while Alberta added 0.22 percentage points to the national GDP.
- In contrast, Newfoundland and Labrador had the largest drag on national economic output, contributing -0.04 percentage points [¹⁴].
Real Estate & Immigration
- Immigration is a major driver of housing demand in Canada. In 2023, Canada welcomed over 400,000 new permanent residents, many of whom require housing upon arrival [¹⁵].
- Population growth from immigration is expected to account for nearly 100% of Canada's labor force growth in the coming decades [¹⁶].
- Canadian newcomers projected to purchase 136,000 homes per year over the next 5 years.
- Foreign ownership represents a relatively small proportion of the Canadian housing market.
- In British Columbia, foreign ownership accounts for 3.8% of the market, or around 66,125 homes.
- In Ontario, foreign ownership represents 2.2% of the market, or approximately 107,340 homes.
- Vancouver and the Greater Toronto Area have seen some of the highest foreign investment and least affordable housing.
Regional Immigration to Ontario
- Ontario is the most popular destination for immigrants in Canada, receiving 46% of all international migration to the country.
- The Homeownership rate for new immigrants in the GTA and Ottawa is 32%.
- The Ontario Regional Immigration Pilot aims to attract skilled workers to rural communities, specifically targeting areas with populations between 20,000 and 200,000. The pilot includes communities such as Chatham-Kent, Cornwall, and Belleville/Quinte West.
- In Mississauga, the benchmark price for all home types was $1,127,200 in August 2023, which is a 2.5% increase compared to August 2022. The single-family home benchmark price was $1,438,300, reflecting a 5.5% year-over-year increase.
- The Peel Region saw a decrease in the average home sale price from $1,225,626 in the first half of 2022 to $1,092,091 in the first half of 2023, indicating a 10.9% year-over-year decline.
Regional Immigration to Quebec
- As of January 1, 2024, Quebec's population reached approximately 8.98 million, reflecting an increase of 218,000 people in 2023, primarily driven by immigration.
- Permanent Immigration: In 2022, Quebec admitted 68,700 immigrants, which was about 18,000 more than the previous year. Two-thirds of these were classified as "economic immigrants."
- The average price of homes in Quebec has been rising significantly, with the median price for single-family homes in Montreal reaching around $519,000 in early 2024.
- New Home Buyers: New immigrants account for a notable portion of homebuyers in Quebec, contributing to the demand for housing. However, specific statistics on the percentage of new immigrants who become homeowners are less frequently reported.
All stats provided are sourced from Real Estate Boards (e.g. CREA, TREB), CMHC, and Statcan directly. They are not Precondo's stats and we make no claims about their accuracy.
Did you enjoy this article? See Precondo’s homepage for more information on properties for sale, rent and pre-construction properties.
References
¹. https://www.springfinancial.ca/blog/lifestyle/average-net-worth-by-age-canada
². https://www.sofi.com/learn/content/average-american-net-worth-by-age/
³. https://www.stocktrades.ca/the-average-net-worth-by-age-in-canada/
⁴. https://www150.statcan.gc.ca/n1/daily-quotidien/240613/dq240613a-eng.htm
⁵. https://www150.statcan.gc.ca/n1/daily-quotidien/240613/dq240613a-eng.htm
⁶. https://mycondopro.ca/occupancy/pre-construction-condos-2024/
⁷. https://www150.statcan.gc.ca/n1/daily-quotidien/240327/dq240327c-eng.htm
⁸. https://www.cicnews.com/2024/06/statistics-canada-forecasts-population-growth-of-21-million-thanks-to-immigration-0645005.html
⁹. https://housepriceindex.ca/2024/01/december2023/
¹⁰. https://www.cfib-fcei.ca/en/research-economic-analysis/private-sector-job-vacancies-in-canada
¹¹. https://thoughtleadership.rbc.com/its-never-been-harder-to-rent-in-canada-vacancy-rates-fall-to-35-year-low/
¹². https://www.cmhc-schl.gc.ca/media-newsroom/news-releases/2024/canadas-vacancy-rate-reaches-new-low-demand-outpaces-supply
¹³. https://wowa.ca/reports/canada-housing-market
¹⁴. https://economics.td.com/ca-real-gdp
¹⁵. https://www.mordorintelligence.com/industry-reports/residential-real-estate-market-in-canada
¹⁶. https://www.statcan.gc.ca/en/subjects-start/housing
