2024 Canadian Home Buyer Report

Despite economic turbulence, the
number of hopeful home buyers in Canada
has only increased. High interest rates and persistent inflation may be chipping away at Canadians’ finances, but not their desire for homeownership.

By Clay Jarvis
February 21, 2024

Interest rates are high. Inflation has feasted on savings. The spectre of recession looms over the economy.

And despite this convergence of demand-stymying factors, home prices aren’t falling. But Canadians are undeterred.

Almost half (49%) say they plan on purchasing a home in the next five years, according to a new NerdWallet study conducted online by The Harris Poll among 1,015 adults from January 17-19, 2024. Forty-three percent of Canadians expressed the same sentiment when we asked a year ago.

In addition to the obstacles buyers face in the market — low supply, high mortgage rates — many could also be stopped in their tracks by insufficient down payment savings. Sixteen percent of those who plan to buy a home in the next five years say they have not started saving a down payment.

The recent experiences of homeowners who accessed professional and financial assistance could point buyers to an easier way forward. Homeowners say they worked with mortgage brokers (21%), used the First-Time Home Buyer Incentive (12%) or accepted down payment assistance from their families (11%).

Key findings

Home buying remains a priority for Canadians. Forty-nine percent of Canadians plan to buy a home in the next five years — up from 43% a year ago. Only 11% plan to buy a home in the next 12 months.
Down payment savings may need a boost. Over three-quarters (76%) of Canadians who plan to buy a home in the next five years say they intend to use a down payment, but 16% haven’t started saving yet.
Home buyers are getting help where they can. Referring to their most recent home buying experiences, homeowners say they made use of mortgage brokers (21%), the First-Time Home Buyer Incentive (12%) and down payment assistance from family (11%).
Will housing supply keep up with demand? Forty-two percent of homeowners say they plan to sell their primary residence in the next five years, while 32% say they have no intentions to ever sell their primary residence.
Personal and financial hurdles make homeowners reluctant to sell. Seventy-seven percent of Canadian homeowners say there are obstacles that would prevent them from selling their primary residence in the next five years.

Why home buying is a priority for Canadians

Almost half (49%) of Canadians — approximately 15.5 million people [1] — say they plan to purchase a home in the next five years. Most, however, seem to be waiting out today’s high-rate environment. Only 11% of Canadians say they expect to buy a home within the next 12 months.

That’s still a colossally high number. The most homes sold in a single year in Canada was fewer than 700,000, so 4.4 million homes changing hands in the coming year is somewhat unlikely.

Though it’s not entirely realistic, the strong desire to buy speaks to how much Canadians value owning their own home. Seventy-two percent of Canadians say homeownership is a priority for them, up from 67% a year ago. Younger Canadians are more likely to place emphasis on homeownership, with 87% of those aged 18-34 saying homeownership is a priority compared to just 67% aged 35 and up.

Some of the most common reasons for prioritizing homeownership are financial. Almost 2 in 5 (39%) Canadians say owning their own home is a priority because it is a good investment, while 23% say it allows them to put their monthly housing payments toward equity rather than rent. Thirteen percent say owning is a priority because it’s how they are saving for retirement.

Other reasons buying a home is a priority for Canadians include wanting more space (24%), the ability to pass the home onto their children (23%) and establishing roots (16%). Fifteen percent of Canadians also prioritize homeownership because it frees them from dealing with a landlord.

Hint for home buyers: If you’ve established a longer time horizon for your upcoming home purchase, you could be entering a market that’s even more expensive and competitive than it is today. Use the coming years to strengthen your case as a mortgage borrower. Make a plan for gradually paying down your debt, which can improve the debt service ratios lenders put so much stock in. Think about setting near- and mid-term career goals, or starting a side hustle, to help you generate as much income as possible.

Insufficient down payments could restrict budgets

More than three-quarters (76%) of Canadians who plan to buy a home in the next five years say they intend to use a down payment. But only 60% say they have started saving that down payment, a drastic reduction from the 76% who said they had started saving when we asked a year ago.

Saving any money in the current economic climate is a cause for celebration, but many home buyers will need to greatly increase their down payment savings if they hope to get approved for a mortgage. This is especially true for Canadians aged 18-34 who plan to buy a home in the next five years, with twenty-one percent of this cohort saying they have not started saving.

Twenty-eight percent of Canadians who plan on buying a home in the next five years have less than $30,000 in down payment savings. A slight majority of this subset (56%) has less than $10,000 set aside.

Canada’s lending guidelines require a minimum down payment of 5% for homes worth up to $500,000. A $400,000 home, for example, would require a down payment of $20,000, an amount approximately 5.9 million Canadians [2] who plan to buy in the next five years cannot currently afford.

Buyers in high-priced markets will have to put down even more. For homes worth more than $500,000, the minimum down payment is 5% on the first $500,000 and 10% on the remaining amount. In December, the average price of homes sold in Canada was $657,145, a purchase that requires a minimum down payment of $40,715.

Hint for home buyers: Putting aside what’s left of your paycheck at the end of the month may not be sufficient for cobbling together the required down payment. Setting monthly or yearly savings goals might be a more effective way to ensure your down payment grows at a healthy rate. A carefully managed First Home Savings Account, which allows you to invest your savings tax-free, can help increase your down payment, too.

Canadians are finding ways to afford homeownership

Homeowners took advantage of various forms of assistance during their most recent home buying experiences.

Some looked for help getting approved for a mortgage. Twenty-one percent of homeowners say they used a mortgage broker for their latest purchase, while 7% say they used an alternative lender.

A high-rate environment is a particularly opportune time to make use of these non-bank resources. The deal-hunting and negotiating skills brokers bring to the table can help borrowers access rates they may not find on their own, while alternative lenders’ less stringent qualification guidelines can provide easier access to mortgage financing.

Homeowners also accepted help in funding their home purchases. Eleven percent of them received down payment assistance from their families, while others used federal programs like the First-Time Home Buyer Incentive (12%), the Home Buyers’ Plan (10%) and the First Home Savings Account (9%).

The assistance on offer could be a factor in why only 11% of homeowners say they had to compromise on their house-hunting criteria because of budgetary reasons.

Hint for home buyers: If you intend to access additional financial support to complete your next home purchase, be sure to understand all the implications. These might include disclosure requirements around gifted down payments, or re-funding your RRSP after using the Home Buyers’ Plan. Conducting a little research into whatever program or funding source you expect to use can help prevent any unpleasant surprises.

The supply-demand imbalance is here to stay

Forty-two percent of homeowners say they plan to sell their primary residence in the next five years. If all follow through — an unlikely scenario considering historical sales figures — that would amount to approximately 8.6 million homes [3] hitting the market.

It’s an enormous number, but with an estimated 15.5 million Canadians planning to buy a home in the next five years, it still falls well short of what the market requires.

On its own, this shortage of listings would be enough to shut millions of home buyers out of the market. But with Canada expected to welcome almost 1.5 million new arrivals between 2024 and 2026, housing demand will only intensify.

Another factor limiting supply is the growing percentage of homeowners who say they are not planning to ever sell their homes. While this figure rose minimally from 31% in 2023 to 32% in 2024, that still represents a further shortfall of more than 205,000 homes [4].

Hint for homebuyers: Expect a competitive housing market and try to prepare accordingly. Reach out to your bank’s mortgage advisor or a mortgage broker well in advance and find out whether you should concentrate on improving your savings, credit score or debt service ratios. It can also be helpful to make a checklist of housing must-haves and nice-to-haves in case the market doesn’t break your way and you have to set your sights a little lower.

The housing market is challenging for sellers, too

Despite the strenuous economic climate, many homeowners cite lifestyle-focused motivations for selling their primary residence in the next five years, such as downsizing (31%), wanting a change of scenery (24%), upsizing (20%) or moving closer to family (15%).

The proportion of homeowners who say their primary motivation to sell is saving money (20%) is fairly consistent year-over-year (22% in 2023), as is the proportion of those who say their primary motivation to sell is that they can no longer afford the mortgage (6%, 7% in 2023).

Over three-quarters (77%) of homeowners say there are obstacles that would prevent them from selling their primary residence in the next five years. Many of these obstacles reflect today’s challenging housing market: Having to buy a new home when mortgage rates are high (27%), having to buy a new home when supply is limited (23%) and the possibility of having to sell their house for less than they believe it to be worth (23%) are all common concerns.

Other obstacles, such as the stress of moving (36%) or not knowing where to move to (25%), are less reliant on the market and could hinder home selling plans indefinitely. Rates and home prices might improve, but moving will always be a drag.

Hint for homeowners: Some home selling stress can be alleviated by working with professionals, but choosing the right ones requires research. If you plan to use a mortgage broker to purchase your next house, start the vetting process at least five months before you plan to sell, which will allow you to make your choice and get pre-approved with time to spare. Finding a mover you like (and can afford), may take longer than you expect, so start searching for one well before you list your home to take at least one worry off your plate. Deciding early which items can be tossed, donated, given away or sold can make for an easier move, too.

Methodology

This survey was conducted online within Canada by The Harris Poll on behalf of NerdWallet from January 17 – 19, 2024 among 1,015 adults ages 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 3.8 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Bria Weaver ([email protected]).

[1] We calculated this number by multiplying the percentage of Canadians aged 18 and older who say they plan to buy a home in the next five years (49%) by Statistics Canada’s estimate of the number of Canadians aged 18 and over (31,615,827) that was published December 21, 2022.

[2] To determine this figure, we first calculated the percentage of Canadians aged 18 and older who say they plan to buy a home in the next five years but have saved less than $20,000 for a down payment (roughly 37.88%). We then multiplied that result by the number of Canadian adults who say they plan to buy a home in the next five years (15,491,755).

[3] We calculated this number by first determining the percentage of homeowners aged 18 and up. We did that by multiplying the percentage of Canadian adults who say they own their own home (65%) by the estimated number of Canadian adults (31,615,827) released by Statistics Canada on December 21, 2022. We multiplied the resulting figure by the percentage of adult homeowners who say they plan to sell their primary residence in the next five years (42%).

[4] We derived this figure by multiplying the percentage of Canadian adults who say they own their primary residence (65%) by the estimated population of Canadians aged 18 and older (31,615,827). We multiplied the resulting number (20,550,287) by the percentage of homeowners who say they have no plans to sell their homes in 2024 (32%) and 2023 (31%). The 2023 figure (6,370,589) was then subtracted from the 2024 figure (6,576,092).