The economy of Canada is a highly developed market economy and it is dominated by the service industry which employs about three quarters of the population. Canada is considered an “energy superpower” due to its abundant natural resources and a small population of 37 million inhabitants relative to its land area.
The role of the real estate sector in the Canadian economic growth is very important and it is expected to be more important in the future. In 2019 the real estate and rental and leasing contributed about 13% to Canada’s GDP and also over half of GDP growth was real estate and construction.
Buying a home in Canada is complicated, as in most of the countries, and it needs a lot of energy to find the best house for yourself and your family, or for investments purpose. Making an optimal choice is never simple. Before buying a house, it is necessary to analysis the real estate market, doing financial planning and determining the risk profile. In this work, we are going to analyse the real estate market and finding the 38 most affordable Canadian cities to buy a home.
If we consider the price to income ratio, the less expensive city is Fredericton, where are necessary 2.47 years to buy an apartment. Moncton is in the second place with 3.2 years, followed by Quebec City with 3.53 years, St. Catharines with 3.9 years and London with 3.95 years.
If we consider price to rent ratio of the city centre, the real estate market is undervalued in Fredericton, Moncton, Barrie, St. Catharines, London, Saskatoon, Kamloops, Edmonton, Guelph, Kelowna, Chilliwack and Regina, so buying an apartment is better than renting. In Nanaimo BC, Kitchener, Winnipeg, Ottawa, Saint John’s, Mississauga, Brampton, Quebec City, Victoria, Calgary, Hamilton and Thunder Bay is better to rent, but not always, because under certain circumstances buying is better. In Burlington, Halifax, Montreal, Coquitlam, Abbotsford, Markham, Windsor, Toronto, Burnaby, Oakville, Kingston, Vancouver, Surrey and Red Deer, the real estate market is overvalued, so in these cities renting an apartment is better than buying.
If we consider price to rent ratio outside the city centre, the real estate market is undervalued in Fredericton, St. Catharines, London, Barrie, Regina, Edmonton, Moncton, Brampton, Chilliwack, Ottawa, Markham, Kitchener, Kelowna, Winnipeg, Guelph, Kamloops and Victoria, so buying an apartment is better than renting. In Halifax, Calgary, Hamilton, Nanaimo BC, Saint John’s, Quebec City, Mississauga and Montreal is better to rent, but not always, because under certain circumstances buying is better. In Burnaby, Windsor, Coquitlam, Oakville, Saskatoon, Burlington, Abbotsford, Toronto, Vancouver, Kingston, Thunder Bay, Surrey and Red Deer the real estate market is overvalued, so in these cities renting an apartment is better than buying.
If we consider the mortgage as percentage of income, the less expensive city is Fredericton, where the mortgage payment is about 18% of the incomes. Moncton is in the second place with 22.66%, followed by Quebec City with 25.03%, London with 27.67% and Edmonton with 27.79%. The most expensive cities are Toronto with 98.63%, Vancouver with 106.9% and Surrey with 107.5%.
Lastly, it is recalled that there could be many occasions to buy an apartment at discount price when the real estate market is overvalued and not only when it is overvalued. In addition, that could be many expensive apartments despite the real estate market is undervalued.
About the data used in this work
Real estate market analysis is made considering an apartment of 90 square meters which price per square meter is the average of price in the city centre and outside of city centre. The indicators used are:
- Price to income ratio. It is calculated by dividing apartment price to median familial disposable income for a year. Lower value is better.
- Price to rent ratio. It is calculated by dividing the apartment price to the received rent income or the estimated rent that would be paid if renting. Lower values suggest that it is better to buy rather than rent, and higher values suggest that it is better to rent rather than buy.
- Mortgage as percentage of income. It is calculated by dividing the monthly cost of the mortgage to take-home family income. Lower value is better.
The data used in this work are provided by Numbeo and are relating to mid-2019.