Purchasing (and owning) a home can bring multiple advantages along with some disadvantages. The current Canadian housing market, along with local and national economic conditions, help to drive each potential homebuyer’s decision to jump into the market or stay on the sidelines.
Greg Aziz, a longtime homeowner in Canada’s Ontario province, maintains an eye on the Canadian housing market. Most recently, he offered an overview of national home-buying trends, including a discussion of supply/demand issues. Greg Aziz also provided a snapshot of the pros and cons of Canadian homeownership.
For a housing trend overview, Greg Aziz referenced the Canada Mortgage and Housing Corporation’s (CMHC) latest national outlook. In April 2023, the CMHC predicted that Canadian home prices would remain in decline until the middle of the year. At that point, the aggregate prices would likely begin to rise, continuing through 2025 (or later).
Although Greg Aziz is happy to see extended lower housing prices, he noted that increased demand and a low supply of homes will create continued home affordability issues. Higher borrowing and construction costs are contributing to fewer housing starts, further compounding the low supply issue.
Greg Aziz also emphasized that mortgage rate hikes are making it even tougher for many people to buy a home. Lower- and middle-income buyers often find that they don’t have the financial resources to take on this substantial burden.
On January 1, 2023, Canada banned non-Canadians from purchasing metro-area residential properties. The two-year prohibition was designed to make more city housing inventory available to Canadians. The ban does not apply to permanent residents and refugees. Greg Aziz noted that foreigners are not excluded from purchasing vacation cottages.
Although the temporary ban on foreign residential buyers is a good starting point, housing industry experts said that it will not really increase Canadian homes’ affordability. Speaking from a supply/demand perspective, Greg Aziz noted that more housing construction will boost the number of homes available for sale. This larger supply of inventory will make homes more affordable.
Canada’s wide-ranging scenic landscapes entice many people to buy a home in a favorite province. The Maritimes attract those who prefer the wild beauty of the Atlantic Ocean. Quebec and Ontario have a European flavor, while British Columbia and Alberta attract homebuyers who love the mountains. Finally, Saskatchewan and Manitoba have expansive prairies for those who enjoy wide-open spaces.
Regardless of the setting, homebuyers will likely find that home ownership has its pros and cons. Greg Aziz offers a balanced perspective that may help a prospective Canadian homebuyer make an informed decision.
Owning a home has several positive attributes. Besides the well-known financial benefit, home ownership also delivers quality-of-life advantages.
Maintaining control over one’s living situation can provide great peace of mind. A homeowner who stays current on their mortgage payments, and keeps up their property, faces little risk of being displaced. With few exceptions, they have the freedom to enjoy the home and the lifestyle it affords.
Renters certainly have more flexibility in leaving an unsuitable living environment. However, they can be uprooted if the landlord decides to sell the property or undergo extensive renovations. In that case, the tenant could be forced to find another living space with little advance notice.
Many years ago, Greg Aziz recognized that home ownership can be a good long-term investment. In the short term, however, housing markets often fluctuate. This may cause homes to lose value during a particular cycle.
In the longer term, however, homes generally gain value while the owner enjoys increasing equity benefits. When the homeowner decides to sell, they ideally will make a profit on the transaction. They can use the extra funds to buy a larger (or newer) house, liquidate other debt, or bolster a retirement account.
To increase their home equity, and exit a future home sale in a more favorable position, the homeowner can make enhancements to the property. Professional kitchen and bath upgrades are high on the list. A finished basement can attract buyers seeking a downstairs rental apartment or an in-law suite.
Personalizing a living space means adding color, lighting, and furnishings that turn the setting into a comfortable home. While renters must get their landlord’s approval for some upgrades or renovations, a homeowner is generally free to undertake these projects without restrictions. However, condo owners may need to obtain approval for certain large projects.
If a homeowner’s life circumstances change, they are free to adapt their home environment to handle those changes. If their family expands, or they bring an aging family member into the home, the homeowner can alter the living space accordingly.
Greg Aziz pointed out that homeownership also has several downsides. Besides the potentially serious financial impact, these disadvantages relate to the substantial ongoing required maintenance. Canada’s notoriously frigid winter weather requires additional precautions.
In addition to the home’s purchase price, Greg Aziz noted that the homebuyer must pay a laundry list of closing costs. These include appraisal fees, property survey fees, and home inspection fees. Lawyer’s fees and land transfer fees also figure into the equation.
Most homeowners must make monthly mortgage payments. In addition, they are responsible for property taxes, property insurance premiums, and perhaps condo maintenance fees. When a home’s HVAC system breaks down, or the roof must be replaced, the homeowner is responsible for covering those costs.
Greg Aziz said that home maintenance has numerous interior and exterior components. Indoors, homeowners should perform regular maintenance on applicable appliances and home systems. Outdoors, homeowners should keep their lawns manicured and rake leaves as necessary.
Contractors must perform certain outdoor maintenance tasks, resulting in higher maintenance expenses. Tree maintenance, including nuisance tree removal, can be expensive. Expansive lawns, landscaping elements, and swimming pools often require professional crews.
Canada’s snow, ice, and frigid cold can take their toll on homes’ structural elements. To prevent or minimize damage, homeowners should keep their gutters and eaves free of debris, snow, and ice accumulations. This will minimize the chances of damaging ice dams.
Homeowners should also take steps to keep their roofs intact and structurally sound. They should replace winter storm-damaged shingles as needed. A leaking roof will likely require professional repairs.
Finally, homeowners should keep their driveways and sidewalks free of potentially dangerous snow and ice. Diligent effort, even when contractors are required, will likely cost less than a lawsuit from someone who fell on a snow-covered or icy sidewalk.
The Canadian housing market continues to experience its ups and downs. In fact, many homebuyers feel that finding an affordable home is their biggest challenge. When they locate a suitable property, viewing homeownership’s pros and cons will help them to make an informed decision about whether it’s the right choice for them.