Real estate investing in Canada has been hot for the past few years. Both Canada and the USA dropped their interest rates due to COVID recovery efforts. As a result, the home pricing increase trend that slowed down in 2018-2019, picked up its strength in 2020-2021, with the average housing price growing 14.6% in Canada in just 2 years.
The question that investors in the Canadian real estate market have is: does the market still have room to grow? Is it too expensive? Are there any cities that are still relatively underpriced? What are the best places to invest in real estate in Canada?
Breaking the data by province shows that, despite a recent price increase across all of Canada, the results are quite uneven across the country. Some provinces like Quebec, BC, Atlantic have been showing a steady price growth for the past few years. The increase in Manitoba is sharp, showing a "hockey-stick" pattern. Increases in Alberta and Saskatchewan are stalling at the moment.
To help identify the best places to invest in real estate in Canada, let's look at the recent growth (past 5 years) and the current average housing price by city. The below graph shows that the average prices in the key Canadian cities range anywhere from $230,000 (Trois-Rivières, Quebec) to over $1.1 million (Vancouver, BC). Also, price growth in those cities over the past 5 years ranged from -2.6% (Regina, SK) to over 60% (Ottawa, Ontario).
The analysis below shows that there are quite a few cities that have low to average price ranges but grew 25% or more over the past 5 years. Toronto, on the other hand, had a below Canada-average price increase. For an investor who is just starting to look for the first real estate investment, researching more about these cities may be the way to minimize the investment for the potential return.
To find the best places to invest in real estate in Canada let's look closer at each of the above cities. Some of them have grown well in terms of average housing prices, but is this growth going to continue? Obviously, there are many factors that affect pricing for homes. The strong surge in prices seen over the past 2 years was brought to Canada by low-interest rates (people can borrow cheaper), and government support in the form of cash (people have money for spending and downpayment). Other factors that impact different cities are the economic situation, availability of jobs, security, immigration, the average level of salaries, etc.
Real estate investing in Ontario, Canada.
Real estate in Ontario has grown 21% over the past 5 years. The most growth is noted over the past 12 months. However, some of the regions, like Ottawa, Kitchener/Waterloo, and London showed a more stable growth over this period. Such stable growth resulted in the highest growth over the past 5 years. Sudbury has seen little growth until 2020.
Ottawa has experienced the highest growth in the prices of houses. With that, the average prices in the city are still not that high compared to Toronto.
The markets with the highest average prices (Toronto, Hamilton, Oshawa) have seen the lowest growth in prices as people look for cheaper options around Ontario. The shift to distance work for many office workers allows moving farther from Toronto to find a more affordable living.
Greater Sudbury, which is a 4-hours drive North of Toronto, has the lowest average prices among cities in Ontario. Here is the example listing for this city:
Real estate investing in Quebec, Canada.
The average price in Quebec went up 31% for the past 5 years driven primarily by Montreal where prices grew 40%. The housing prices grew 15% in the Quebec part of Ottawa and Quebec City. Sherbrooke and Trois-Rivières saw the least growth.
The average housing price in Quebec province stands at $452,000, again driven by Montreal.
The lowest prices are noted for Trois-Rivières which is an hour-and-a-half hour drive from Montreal. Below is the listing from this city:
Real estate investing in British Columbia, Canada.
The prices in British Columbia were quite stable from 2017 to August 2020. However, in the past 12 months, the prices sharply increased driven primarily by Vancouver and Kelowna.
Vancouver has the highest average housing prices in Canada. The nice city 4 hours drive away from Vancouver, Kelowna, has the lowest price among the 3 key cities in British Columbia.
Real estate investing in Prairie Region, Canada.
The prices were mostly down in Saskatchewan and Alberta over the past few years. However, in 2021 the prices saw a bit of an increase.
In Winnipeg, Manitoba, the prices were slowly increasing up till 2021 and saw a sharp increase in the past 12 months, resulting in a 27% growth over the past 5 years. However, the average price in Winnipeg still stands at $319,000 which is below Calgary, Edmonton, and Saskatoon. Below is an example listing from this city:
In summary, the real estate market in Canada saw a steep increase in prices. However, there are still cities across Canada that show good value and may continue growing in the future due to the trends in people moving away from city cores, moving to other provinces, increases in pressure on employers for the salary increases which will result in more money at the disposal of homebuyers.
Data sources:
Average prices in cities: The Canadian Real Estate Association
Housing index: Statistics Canada