Canada’s real estate market is in serious trouble. It’s like trying to fill a bucket with a hole in it—no matter how much water (or people) you pour in, the system just can’t keep up. We’re facing a housing shortage, construction delays, skyrocketing costs, and now, to make matters worse, rental yields are plummeting. And while the new mortgage rule allowing homeowners to refinance up to 90% for secondary units sounds promising on paper, it might not actually solve anything.
Let’s break this down. If you’re new here, I’m Avjot, and my goal is to help 1 million immigrants retire with $5 million. If you want to be part of that mission, hit subscribe—I promise to bring you top-notch content that can help you build wealth.
Now, a lot of people say Canada isn’t building enough homes, but that’s not the real issue. Let’s start with population growth. From 2014 to 2024, Canada’s population grew by nearly 6 million people. During that same period, about 2.4 million new homes were built. That means for every new home constructed, 2.3 people entered the country. On the surface, that ratio isn’t terrible—Canada’s average household size is 2.4—so why is there still a housing crisis?
The answer is simple: we’re building the wrong kind of homes. Over the past decade, the proportion of apartments being built has increased from 45% to 60% of all new housing. While apartments are great for renters, many families and immigrants want to buy freehold homes—detached or semi-detached houses—and those aren’t being built in sufficient numbers. Everyone talks about the need to build more homes, but no one is addressing the fact that we’re not building the right types of homes to meet demand.
Reports suggest Canada needs between 3 to 4 million more homes by 2030. The Canada Mortgage and Housing Corporation (CMHC) has set a target of 3.5 million new homes by then, which means we need to build 500,000 homes annually. In 2024, we only built half of that. And it’s not just about quantity—construction costs have skyrocketed. Since the pandemic, material costs have increased by 51%, and in Ontario, taxes and fees now make up 36% of the purchase price for a pre-construction home. That’s $360,000 on a $1 million home—double what it was a decade ago.
But it’s not just about materials and costs. There’s also a massive labor shortage. We need 83% more skilled construction workers to meet housing demand over the next six to seven years. Despite all this, prices in prime locations haven’t dropped significantly. Why? Because the supply gap, especially for freehold homes, continues to grow.
From an investor’s perspective, the market is tough right now, particularly in Ontario and British Columbia. Cash flow is hard to come by, tenant demand is shrinking, and landlord-tenant board rules make it difficult to deal with non-paying or problematic tenants. Immigration trends are also shifting. Over the next few years, Canada plans to reduce the number of non-permanent residents, including students and temporary workers. This means fewer tenants for secondary suites and basements, which many investors rely on for rental income.
The new mortgage rule allowing homeowners to refinance up to 90% for secondary suites might seem like a great opportunity, but with fewer temporary workers and students, finding tenants for those units will become increasingly difficult. If you’re thinking of investing in Ontario or BC, you might want to reconsider—cash flow is already tight, and it’s only going to get tougher.
Then there’s the looming threat of U.S. tariffs on Canadian imports, particularly lumber and aluminum. While it might seem like more lumber and aluminum staying in Canada would lower construction costs, the reality is that over 50% of Canada’s softwood lumber and 90% of its aluminum are exported to the U.S. If tariffs are imposed, many Canadian producers could go out of business, leading to shortages and higher prices for these critical materials.
So, what does all this mean for the real estate market? First, interest rates are coming down, and new mortgage rules allow for 30-year amortizations with less than 20% down. This is making homes more affordable for buyers, which is why prices haven’t dropped significantly despite all the challenges. Second, the supply gap for freehold homes is likely to widen, driving up demand and prices for this asset class. While we might not see the 7-10% annual growth of the past, a steady 3-4% increase is realistic.
On the other hand, condos are likely to struggle in the short to medium term. With a flood of new builds hitting the market and investors divesting due to negative cash flow, condo prices could face downward pressure. Investors are increasingly avoiding Ontario and BC due to poor cash flow, shrinking rental demand, and unfavorable landlord-tenant laws.
If you’re considering buying a primary home, now might not be a bad time. Prices are more negotiable, and there’s more inventory to choose from. I recently upgraded my own home, selling a townhouse for less than I would have in a stronger market but buying a detached home at a significant discount. If you’re buying for the long term—especially in a good location with strong school districts—you’ll likely see steady growth over time.
As for investment properties, I’m focusing on Calgary. Compared to Ontario, Calgary offers better cash flow, lower closing costs, and no rent control, allowing landlords to adjust rents based on market conditions. The landlord-tenant laws are also more balanced, making it easier to manage properties.
In summary, Canada’s real estate market is broken, and it’s not going to fix itself anytime soon. While there are opportunities, especially in certain markets and asset classes, investors need to be cautious. For now, I’m staying away from Ontario and BC for investment properties and focusing on markets like Calgary where the fundamentals are stronger.