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Finding affordable housing in Canada can be challenging for newcomers. Here's how to find a great home now.

With affordable housing in Canada taking a much-publicized hit in recent months, many recent newcomers find themselves questioning whether buying a new home is even possible in today’s turbulent housing market.

Of course, renting a home is still one affordable option. But if you’re looking to purchase, positive signs in the Canadian housing market indicate the potential for a smoother road for home buyers. Here’s how you can navigate the Canadian home buying process.

If you’re dreaming about buying a home

The end of 2021 saw an imbalance in the Canadian housing market that favoured sellers. The result was a “hot sellers’ market” where there fewer homes for sale, while demand among buyers was high. With home prices continuing to increase, this had an effect on affordability for many home buyers.

But fortunately for newcomers saving to buy a new home, the RBC Monthly Housing Market Update says there are signs that a more balanced housing market may be coming. By March 2022, the number of homes on the Canadian housing market increased by 24% from January. Housing prices did continue to increase during this period, but there’s a chance that the Bank of Canada’s recent hike in its policy rate — a move that increases mortgage rates — will result in less demand because fewer people may want to buy.

All this means there’s potential for a more balanced housing market in 2022, according to RBC Economics’ Robert Hogue. And with a balanced market, the Canadian housing market would no longer favour sellers over buyers.

What does this mean for newcomers starting to save for a down payment on a home? With more properties on the market, your journey to buying a home in Canada may not be as far away as it seemed last year.

If you’re ready to buy your first home in Canada

For newcomers ready to start the home buying journey, here are some tips to help make your road forward go more smoothly:

Be prepared. It can be tempting to jump right to the house hunting phase of buying a new home, but there are a number of things you need to do first.

  • Down payment. To buy a home, you know you need a down payment, but how much should it be? It’s preferable to have a down payment of at least 20% of the purchase cost of your new home. If you have less than 20%, you’ll need to obtain CMHC insurance, also known as mortgage loan insurance. This type of insurance protects your mortgage lender if you default on your mortgage.
  • Additional costs. A down payment isn’t the only thing you need to budget for when buying a new home. You’ll also need to pay closing costs. Make sure you have a rough estimate of what you’ll need to pay to close your home purchase deal. Your mortgage provider or real estate agent can help you estimate your closing costs.
  • Affordable price range. Don’t know how much you can afford? Start by looking at the house prices in the areas you’d like to move to, and compare it to your savings and household income. For more detail, you can use a tool like RBC’s Mortgage Affordability Calculator to help figure out just how much home you can afford.
  • Mortgage pre-approval. When you obtain mortgage pre-approval, your lender is committing to lending you the funds you need, subject to certain conditions. A pre-approval gives you a good idea of your future monthly costs and shows sellers you have the funds available to back your offer. Many lenders also provide an option to lock in your mortgage rate for a specified period, which is useful when interest rates are expected to increase.

Buying your new home. Once you’ve done the prep work, you can jump into the fun part of the home buying process: finding your new home.

  • Look at homes for sale. While it’s possible to buy a new home on your own, many home buyers enlist the help of a real estate agent at this stage. You shouldn’t need to worry about paying your agent’s commission. In Canada, it’s usually the seller who pays commissions to both their real estate agent and the buyer’s agent.
  • Make your offer. When you find the right home for you, you’ll need to make an offer. If you have a real estate agent, they’ll help you with this part of the process. Your offer may be conditional on things like obtaining a house inspection. You may not need to pay for an inspection, but it’s highly recommended. A professional home inspector may find problems with the home that others don’t see.
  • Close the deal. Once your offer is accepted, you’ll need to finalize your mortgage and retain a real estate lawyer to deal with the legal aspects of your purchase. Your lawyer will handle legally transferring ownership of the home to you. You’ll also pay the down payment at this point and your closing costs.

If you’re still going to rent for a while

During the pandemic, rental prices in many urban areas in Canada dropped due to an increased inventory of rentals. However, since that time, the number of available units is back to near pre-pandemic levels.

In March 2022, Canadian rental properties averaged $1,820 per month, according to Rentals.ca’s National Rent Report. This represents an increase of 6.2% when compared to the average monthly rent of $1,714 in February 2021. But despite this, average asking rents have not yet increased to 2019 pre-pandemic levels.

Here’s a snapshot of what rental prices looked like in March 2022 in the following Canadian cities:

  • Vancouver had the highest average rental costs, averaging $3,050 per month for a 2-bedroom unit.
  • In Toronto, the average rent for a 2-bedroom unit was $2,778.
  • For Montreal, the average rent for a 2-bedroom unit was $1,994.
  • In Calgary, the average rent for a 2-bedroom unit was $1,514.
  • For Winnipeg, the average rent for a 2-bedroom unit was $1,435.

Getting started

It’s still possible to find an affordable home in Canada today, and the market may be improving for first time home buyers. And if you’re looking to buy, opportunities for home buyers are looking brighter.

To find out more about how RBC can help towards buying your first home in Canada, visit RBC’s Newcomers to Canada Hub.