Canada Housing Crisis: Prices Near Record, First-Time Buyers Locked Out

In December 2024, Canada's national home price index stood just 0.3% below its April 2022 record—yet 55% of non-owners say they have no plans to ever buy a home, and only 6% are looking to purchase their first property. The housing market is defying gravity, and first-time buyers are being locked out.

The Market That Won't Cool

Canada's housing market is displaying a perplexing resilience. According to the Teranet-National Bank House Price Index, the national composite index rose 0.8% month-over-month in December 2024, marking the sixth consecutive monthly increase. Since the Bank of Canada's first rate cut in June 2024, prices have climbed 2.9%, leaving the index just 0.3% below the all-time peak of April 2022. The recovery is broad-based but uneven. A report from CNW Newswire notes that the national aggregate home price rose 3.8% year-over-year in the fourth quarter of 2024, led by Montreal at 8.2%, while Toronto rose a modest 2.3% and Vancouver only 0.7%. The rebound is fueled by renewed demand, but that demand is not coming from first-time buyers.

Rate Cuts Brought Buyers Back—But Not First-Timers

The Bank of Canada slashed its policy rate from 5% in June 2024 to 3.25% by year-end, according to the Real Estate Institute of Canada, relieving borrowers and stimulating activity. Sales volumes picked up, but the Canadian Real Estate Association's data (via CBC News) showed that while sales increased month-over-month, they remained lower year-over-year, prompting CREA to lower its sales and price forecasts for 2024 and 2025. The rate cuts have rekindled competition among buyers, but the profile of buyers has shifted. Entry-level purchasers are being squeezed out by investors and those with accumulated equity. As the Teranet-National Bank report highlights, the index is now within striking distance of its record, yet the recovery is precarious: Toronto and Vancouver, the country's most expensive markets, are lagging, suggesting that affordability constraints are capping price growth in the largest cities.

The Affordability Wall

A survey by Canadian Mortgage Professional found that 55% of non-owners have no plans to ever buy a home, and only 6% are actively looking to purchase a first property. The top obstacle? Affordability: 23% cited the cost of living as the primary barrier, not economic uncertainty. The same source reported that 23% of renters said high living costs prevent them from saving for a down payment. The gap between incomes and home prices is widening. Research from the UBC Housing Assessment Resource Tools program found that the homebuying affordability ratio—the share of median household income needed to cover mortgage payments—jumped from 39% in 2019 to 54% in 2024. For many, the dream of homeownership is out of reach even with lower interest rates. Even starter homes are becoming harder to afford. A report by Yahoo Finance Canada notes that the shortage of entry-level options is easing, but affordability continues to deteriorate. The federal government's GST relief for first-time buyers on new homes up to $1.5 million, announced in May 2025 and allowing savings of up to $50,000, has not been a game-changer. Another Canadian Mortgage Professional survey found that while 63% of respondents said the GST rebate helps, 64% see no perfect window to buy, 75% are cautious due to uncertainty, and 72% call affordability the biggest obstacle. "The barrier is not rates or prices—it's the sheer cost of entry," the survey's authors concluded.

Policy Toolkit Falling Short

The federal government has deployed a suite of measures to cool the market and boost supply. In February 2024, it extended the ban on foreign ownership of Canadian housing by two years, as announced by the Government of Canada. Yet the impact appears limited. According to a legal analysis by BLG, foreign buyers represented just 1.1% of sales in British Columbia in 2021, and average prices rose more than 20% during the ban. The ban is set to expire in 2027, and some developers are already lobbying for its removal. The Globe and Mail reported that B.C. developers are pressing for an easing of foreign investment laws to avoid a crash in the construction industry. Budget 2024 set a target of building 4 million homes, but the goal remains aspirational. The Government of Canada outlined measures to protect renters and ease home buying, but actual construction is falling short. Meanwhile, the GST relief for first-time buyers, while welcomed, has not altered the fundamental affordability equation.

Supply Constraints Deepen

The supply side of the equation is worsening. In July 2026, the Globe and Mail reported that CMHC forecasts annual housing starts to fall 7% to 241,400 units this year, with further declines expected. The Financial Post noted that the six-month trend in housing starts fell 2.8% to 248,123 units on a seasonally adjusted annualized basis, and the monthly annualized pace was down 6% from the previous month. Actual starts fell 13% year-over-year. Builders are pulling back amid high costs, labor shortages, and financing challenges.

CMHC CEO Coleen Volk told the Globe and Mail that "Canada's housing-supply crisis isn't over" and that pent-up demand from the middle class, immigrants, and young people remains strong. "We still need more construction, especially of rental housing and missing-middle units," she said. The CMHC Housing Supply Report for spring 2026 found a short-term surplus but growing imbalances between rental and ownership supply, with missing-middle construction increasing but not enough to close the gap. CMHC's long-term framework, outlined in Canada's Housing Supply Shortages, estimates a significant supply gap that will take years to close, even with accelerated construction. The agency's scenarios show that without a sustained increase in building, affordability will remain historically poor.

The Investor-Driven Market

A key factor behind the market's resilience is the rising role of investors. The UBC HART report notes that the share of investment properties has grown, crowding out first-time buyers. "The investment property trap is worsening Canada's crisis," the report states. With prices near record highs and rental demand soaring, investors see real estate as a safe haven, further inflating prices. The foreign buyer ban has done little to deter domestic investors, and the impending expiry of the ban in 2027 has sparked debate. Some developers, as reported by the Globe and Mail, argue that foreign capital is needed to finance new construction. Yet critics counter that foreign investment only exacerbates the affordability crisis. Canada's housing market remains among the world's least affordable. According to Canadian Mortgage Professional, Canada's median multiple—the ratio of median house price to median household income—stands at 5.4, well above the "severely unaffordable" threshold of 3.0. By comparison, the United States has a median multiple of 4.5, the United Kingdom 5.2, and Vancouver ranks among the least affordable cities globally.

The combination of near-record prices, collapsing first-time buyer participation, and falling construction points to a market that is structurally broken. The Bank of Canada's rate cuts may have revived sales, but they have not solved the underlying problem. As CMHC CEO Coleen Volk put it, "The crisis is far from over." What will it take to bring first-time buyers back? With prices barely below their peak, supply shrinking, and investor demand unabated, the answer remains elusive—and the market remains as unaffordable as ever.