Canada's 3 Least Affordable Cities (and How to Afford Buying a Home in One of Them)

If you’re thinking about buying a home but current prices have your head spinning, you’re not alone. 

Since the pandemic began, many Canadians realized they wanted more functional homes with loads more space, so they marched bravely into the real estate market, equipped by ultra-low mortgage rates and new work-from-home arrangements.

Of course, we all know where this story led: the real estate market quickly caught fire, scorching inventories of available homes and driving prices astronomically upward in many parts of the country. 

In fact, while some local markets are showing early signs of cooling, the national average home price in October rose 18% compared to the same month last year at $716,585,1 with average prices nearly twice that high in some in-demand locales. 

So, where do Canadians face the steepest entry to homeownership? Using the Desjardins Affordability Index (DAI),2 we’re taking a look at some of the highest-cost cities in Canada and some strategies to make buying a home in one of them a reality.

The Desjardins Affordability Index

But first, the method. 

Each quarter, Desjardins, Canada’s largest financial cooperative, publishes its affordability index. The DAI uses average sale prices, mortgage rates, average incomes, and other figures from Stats Canada to determine the ratio between the average homeownership costs in a given census metropolitan area (CMA) and the qualifying income for the average mortgage. 

According to the recommendation of most lenders, the cost of homeownership shouldn’t be more than 32% of a household’s income.3 So, a high ratio on the DAI means greater affordability (if 100% is the qualifying income, then a ratio of 140% would mean the average household income is 40% higher than what’s needed to secure the average mortgage). A low ratio – you guessed it – means lower affordability. 

While the DAI can be used to predict major price variations and assess risk in the housing market, the ratios from this quarter confirmed what many Canadians already know: homeownership is getting less affordable (nationally, it’s 11.2% less affordable than in Q4), especially in the following CMAs. 

The High Rollers

Taking first place for the least affordable place to own a home this quarter is Toronto, Ontario, followed by St. Catharines-Niagara and Hamilton, Ontario, with ratios of 78%, 81.6% and 85.8%, respectively. 

This means that in Toronto, the average household income amounts to only 78% of the qualifying income for an average-priced home in the Toronto CMA – down 6.7% from just last quarter. And so it goes for St. Catharines-Niagara, where affordability fell 14% over the same period, and for Hamilton, where it also fell by 6.7%.  

This comes as little surprise for many. The latest reports on the real estate market put the average selling price for all home types in the Greater Toronto Area (GTA) at a record $1,155,345 – up a little over 19% from a year ago.4 In the Niagara Region, the composite benchmark price (which is similar to an average price, but which measures property value based on “typical” homes in the area) came in at $679,400, up a stunning 34% from last year.5 In Hamilton, the average selling price was $864,474 at an increase of 30%.6 

While the Niagara number seems low by comparison, remember that affordability in the DAI measures home costs relative to the average income in that area. 

Niagara is also farther from Toronto than Hamilton is, but both are within one-and-a-half hours’ drive down the same major highways from the Big T.O., which is historically known for competing with Vancouver, B.C., for the highest-priced homes in Canada. 

Therein lies one of the main reasons for their lack of affordability: in recent years, they’ve been two popular “bedroom communities” for people priced out of Toronto but willing to commute, or for those looking for smaller-town vibes without going too far afield. 

And since the pandemic reshuffled many work arrangements, scores of Torontonians became even more willing to pull up stakes and compete for property on the Hamilton and Niagara markets. 

How to afford the unaffordable?

If you don’t have a big chunk of home equity or a whopping loan from the bank of Mom and Dad to put toward a down payment, breaking into any of these three markets can be a challenge. 

You could take advantage of the work-from-home trend and go to a market considered to be affordable – that is, if you’re willing to relocate to another province. According to the DAI, all major Ontario CMAs fall into the “not very affordable” range, while out west, Calgary, AB, and Winnipeg, MB, are teetering on the edge. Only a handful of regions make the cut for being reasonably priced; among them are Edmonton, AB, and few Quebec CMAs. 

But many would-be buyers have good reason for shirking an inter-provincial move, such as not wanting to leave behind family or aging parents, having a job that they need to show up for, or simply not being ready to call a new province home. 

If you feel caught between a rock and a hard place, consider these three options when searching for a new home in high-priced places:

1. Buy a condo

Condos are typically much cheaper than detached homes – to the tune of a few hundred-thousand dollars – making them great choices for first-time buyers.  

In October, the average selling price of a condo in Toronto was $739,647, compared to $1,784,979 for a detached home (ahem, a difference of one million dollars). In Hamilton, a condo would run you an average of $497,230, while a detached home would cost around $943,961. The Niagara Association of REALTORS® doesn’t break down average prices for condos vs. detached homes.

While condos typically don’t come with a white picket fence (does anybody still have those?), and some may feel a little like the rental you’re itching to leave behind, they can be incredibly stylish and they offer some great perks: they’re often smaller to furnish, some come with fitness areas and pools, there’s little to no yard work, and they’re often close to downtown cores, saving  you money on transportation. 

But, most importantly, paying down a mortgage on a condo means you’ll stop lining your landlord’s pocket and start building the home equity you can leverage for a bigger mortgage down the road.

2. Buy a home and rent out a room

No, this strategy may not help you with your down payment, but if you can pony up that portion of the homeownership costs, renting some space to a tenant can go a long way toward offsetting your monthly mortgage payments.

There are a few ways you can approach a rental arrangement: you can buy a home with a ready-made basement or upstairs apartment (think kitchenette and separate entry), buy a home with potential for one (a licensed apartment/suite can up your resale value in the future), or, depending on your comfort level with the tenant, you could simply rent out a bedroom. 

In the most recent Rental Market Survey by the Canadian Mortgage and Housing Corporation,5 the average rent for a one-bedroom apartment in Toronto was $1,141 per month; in Hamilton, it was $898; and in St. Catharines, it was $774. Chances are an apartment or bedroom in your home would go for as much as a few hundred dollars less, but several thousand extra bucks in the bank every year could go a long way to boosting affordability!

3. Buy a fixer-upper

Buying a less-than-perfect home in the lower ranges now could be your ticket into the market, allowing you to spread the costs of home improvement out over time (leverage that home equity, once again). Don’t think of it as buying a dump; instead, think of it as buying a canvas that will eventually become your masterpiece!

They say life is all about compromise. In a world of instant gratification, compromising on the things we want can be tough – especially when it’s about something as important as your home. But when it comes to buying property in high-priced locales (in a seller’s market, no less!), we can take a page from Aesop, who wrote about the reed bending in the wind while the oak tree fell. Though it’s definitely windy out there, your ability to bend rather than holding out for your dream home could mean you’ll be standing tall in no time. 


Need to sell or buy a home? FairSquare Group Realty can help.

We’re the real estate brokerage that offers a smart, modern choice for Canadians. With thousands in commission savings for sellers, $2,000 cash back* for buyers, and experienced professional support every step of the way, it’s the new way home. Yours. Call 1-855-999-9740 to learn more.

** Cash back – How the Home Buying Service cash back works: FairSquare will share with the buyer the commission it receives from the seller’s agent up to a maximum of $2,000 in cash back. No cash back if the commission received is lower than $5,000. Where available.

On December 1, 2021, Purplebricks rebranded to FairSquare Group Realty. Blog articles published before this date were created under the Purplebricks brand but remain the property of FairSquare Group Realty.

In January 2019, ComFree Commonsense Network Brokerage rebranded to Purplebricks.