The Beginner’s Guide To Understanding Canada’s 2021 Real Estate Trends

Take Advantage of Low-Interest Rates

To propel Canada’s economic recovery forward, the Bank of Canada has pledged to maintain its benchmark interest rate of 0.25 percent until 2023.

What does this mean for homebuyers?

Now is the time to consider home buying or purchasing a rental property. With interest rates low, fixed mortgage rates have never been more attractive. In an interview with ratehub.ca, James Laird commented on the topic, saying, “Canadians who derive value from certainty should choose a fixed rate. For Canadians who are open to a little more risk, considering a variable rate is certainly appropriate since the Bank [of Canada] is committed to keeping rates where they are for at least another two years. If the economic recovery stalls, there is the possibility that the Bank moves rates down further, which would benefit anyone in a variable rate mortgage.”

Canada’s Most Affordable and Unaffordable Cities for Homebuyers

Andra Hopulele from Point2Homes, posted a recent study outlining the top 10 most affordable and unaffordable places to live in Canada. The data analyzes the percentage of income that goes towards mortgage payments and compares it to the region’s average home price and average household income. The data below shows the percentage of income that goes towards mortgage payments.

The 10 most unaffordable cities in 2020:

Burnaby, BC (54%)
Richmond, BC (52%)
Oakville, ON (51%)
Vancouver, BC (43%)
Kelowna, BC (41%)
Langley, BC (40%)
Coquitlam, BC (33%)
Saanich, BC (28%)
Richmond Hill, ON (25%)
Ajax, ON (25%)

The 10 most affordable cities in 2020:

Halifax, NS (10.8%)
Windsor, ON (11.4%)
London, ON (11.4%)
Quebec, QC (12.0%)
Oshawa, ON (12.1%)
Saguenay, QC (12.4%)
Sherbrooke, QC (12.7%)
Winnipeg, MB (12.9%)
Regina, SK (13.3%)
Trois-Rivières, QC (14.5%)

Although Saskatoon, SK did not make the 2020 list of affordable cities, 17% of residents” income goes towards mortgage payments.

Changing Demographics

Generational cohorts are defined as a group of people who experienced similar events when they grew up.

Baby boomers are the generation born between 1945 and 1966. In an online survey of 1000 baby boomers, Royal LePage found that 27 percent of baby boomers in Saskatchewan and Manitoba plan to downsize and buy a new house in the next five years, and 67 percent plan to remain in their current home and renovate – the highest proportions in Canada.

Generation X is the group of people born between 1967 and 1980. Generation X is often overshadowed by its counterpart generations and looked upon as the ‘middle child’ generation. However, the MSLGroup notes that they should not be overshadowed as this generation is “in its peak earning years, and generally enjoy a higher household income than their millennial counterparts. With the average annual household income of Gen Xers being $102,000 compared to $71,000 for millennials and $98,000 for baby boomers, Gen Xers have cash to burn.” The purchasing power of this generation is far superior, presenting opportunities to market the idea of rental properties as a form of passive income.

Generation Y, otherwise known as millennials, is the generation born between 1981 and 1995. The majority of millennials are nearing the end of renting and are looking towards purchasing a home. A poll of 900 renters across Canada found that 51 percent of renters are millennials, and 83 percent of millennials plan on buying a home shortly – more than 40 percent of the surveyed millennials have intentions of buying a home in the next 1-3 years. The biggest challenge this generation is facing is saving for a down payment with over 35 percent of millennials needing to save up for a larger down payment (Schlesinger, 2019). “Additionally, 14 percent noted they cannot buy because they do not qualify for a mortgage, while another 14 percent are currently repairing their credit score. As well, 12 percent of respondents indicated a lack of affordable options keeping them out of the market. Almost 75 percent of those surveyed stated rents were within their budget (Schlesinger, 2019).”

Generation Z is the group of people born after 1996. According to TransUnion, only 8 percent of generation Z Canadians are over the age of 18; of the 8 percent, 63 percent are already credit 10 active. “52 percent of generation Z consumers want to buy homes on their own versus 49% of millennials (TransUnion).” In an interview with Canadian Real Estate Wealth, Elton Ash, Regional Executive Vice President for RE/MAX of Western Canada, noted that “Gen Zers are interested in learning more, and a greater effort needs to be made to educate them about the benefits and potential risks of homeownership.” This generation is eager to learn more and become informed of the market, trends and industry insight. Generation Z is entering the rental market and will soon outnumber millennial renters. Generation Z is looking towards luxury and high-end amenities. The Washington Post notes that “When it comes time for Gen Zers to transition from student housing to living on their own, they will look for amenities similar to what they had in college such as indoor pools, leading-edge wireless capabilities, gym facilities and communal spaces.” This generation has high expectations when it comes to amenities.

What are Tenants Asking For?

This past year has been crazy, to say the least. People looking to rent have shifted their priorities and are looking for more space since working from home is more common. In the past couple of months, Real Property Management Professionals in Saskatoon, SK, has noted some of the trends amongst tenants:

Tenants are looking to find a residence with a lower price than their current residence
Tenants are looking to rent for shorter periods. This is mainly caused by job uncertainty, or they are waiting for their house to be built
More than ever, tenants are moving from out-of-province or out-of-country to be with family
Tenants are working from home more and are looking to rent a property with 3+ bedrooms for extra space
Tenants looking to rent while saving up for a down-payment on a property
Looking for safe neighbourhoods close to schools for their children
Looking to move to an area that is closer to work, or move to a neighbourhood where there is more value for their dollar
Not looking to pay more in rent than what a mortgage payment would cost
More and more tenants are looking towards sustainability to help reduce their carbon footprint
Looking for a great location within a short distance to entertainment, grocery stores, shopping, eating out, etc.
Since space is more critical, tenants are looking for the square footage of a property to be mentioned in the listing
More than ever, tenants are looking for renovated properties, newly built properties, and properties with modern amenities

For investors to maximize their income, it is crucial to adapt and keep in mind the needs of tenants.

Conclusion

To practice the Japanese art of Kaizen, continuous improvement, it is important to be aware of trends and think of ways to use trends to your advantage. To be the best in the industry, it is essential to recognize trends before they occur and market yourself or your business in a desirable position.

“If you’re interested, you’ll do what’s convenient. If you’re committed, you’ll do whatever it takes.” – John Assaraf