If there’s one word that could describe the Canadian real estate market in the past few years, it’s “rollercoaster.” First, 2020 and 2021 brought record-breaking home prices as the pandemic spurred Canadians to find a place to call their own. This demand, coupled with a low supply of homes for sale, led to an unprecedented run-up in home prices across the country.
This wild west of home buying ended in 2022 when rising interest rates led to a cooling of home prices across Canada. While higher interest rates meant the cost of a mortgage was higher, 2023 was the first year since the beginning of the pandemic that Canadian homebuyers could hope to purchase their homes in a buyer’s market and get the upper hand in their purchases.
So, just how did Canadians who bought homes in 2023 fair? How did they cope with higher interest rates? Were they able to take advantage of the balanced markets and negotiate for more conditions – like adding a home inspection to their offer? What was considered normal when buying a home in 2023 – and what can we take away for the 2024 Canada housing market?
Canadians have experienced two wildly different housing markets in the past two years, so we asked 800 Canadians how, when, where, and why they bought their homes in 2023, and we’re sharing the details.
Key Findings
- Canadians are getting thrifty. 34% of homebuyers shopped for a mortgage lender in 2023, compared to 26% in 2022
- Tapping family for down payment money is becoming the norm. 68% of homebuyers relied on family money for at least part of their down payment
- A cooling real estate market means more room for negotiation. 41% of homebuyers used a home inspector, making them the second most commonly used real estate professional
- Creative living situations are on the rise. 35% of Canadians said they bought with friends or family outside of a romantic relationship
The trends we observed amongst Canadians who bought homes in 2023 can be boiled down to: higher interest rates meant reduced buying power, so homebuyers got thrifty by shopping around for the best mortgage rates and exploring working with friends and family to achieve their dream of homeownership. Keep reading for insights across every homebuying stage.
Canadians Get Thrifty to Afford Homes in Expensive Markets
While it might seem as though the first step to buying a home is to call a real estate agent and start viewing homes, preparing to buy a home starts months (or even years) earlier. Whether you’re a first-time homebuyer, a downsizer, or somewhere in between, buying a home is a significant financial undertaking, and it pays to be prepared. Here’s what Canadians did to prepare for homeownership in 2023:
More Canadians Shopping for the Best Mortgage Lender to Combat High Interest Rates
One of the first steps when setting your home purchasing budget is to decide on the size of your down payment, something 59% of Canadian homebuyers did last year. Setting a budget is an essential step because the size of your down payment will significantly impact how much home you can afford. In 2023, 35% of Canadian homebuyers explored getting down payment money from family or friends, compared to 34% in 2022.
Another important factor when determining your homebuying budget is your mortgage’s interest rate, a fact not lost on Canadians. More homebuyers caught onto the fact that the lower their interest rate, the lower their monthly payments, and they took the savvy step to shop around for their mortgage lender. In 2023, 34% of homebuyers reported shopping for a mortgage lender, compared to just 26% in 2022.
Mortgage expert Angela Calla says this is a smart strategy, “Working with a [mortgage] broker can lead to cost savings and better long-term financial outcomes.” Calla says that every lender has their own bias to sell their products, and using a mortgage broker can help Canadians shop for the best mortgage rate without inadvertently harming their credit scores.
“In essence, choosing a mortgage professional means consumers can navigate the mortgage landscape confidently and secure the best possible terms for their future.” This is advice homebuyers should heed going into the 2024 Canada housing market.
Bank of Mom and Dad? 68% of Canadians are Tapping Family Money for Down Payments
While the minimum down payment allowed in Canada is 5%, many homebuyers put down a larger sum. A 2021 Canadian Real Estate Association report found that Canadians are putting down hefty sums of money for their down payments. Here are the average down payments by province:
- British Columbia – 22.5%
- Ontario – 20.35%
- Quebec – 15%
- Alberta – 15.15%
- Nova Scotia – 15.26%
Larger down payments can lower monthly mortgage payments, but where are Canadians getting the cash for these large down payments? After all, the average cost of a home in British Columbia was $991,440 in February 2024. Using the average down payment size of 22.5%, the cash deposit could be as large as $223,074.
The answer to this question is family. When we asked Canadians where they got their down payments, 48% said they used money from their parents, relatives, or their partner’s parents or relatives. Another 20% said they used money from an inheritance, for a total of 68% of Canadians relying on family money for at least part of their down payment.
In addition to help from family and friends, 23% reported using money from a home equity line of credit (HELOC) or proceeds from the sale of another property. Using debt from another property to buy a home is relatively common but can pose some risks. Homebuyers should ensure they can afford to service their debts, even if interest rates rise.
First-Time Homebuyers Sleeping on Tax-Advantaged Accounts for Their Down Payment Savings
Wherever Canadians source their down payment, it’s wise to use one of Canada’s registered accounts to maximize tax benefits and the interest earned before buying a home. That said, Canadians aren’t making the best use of the programs available to them.
In 2023, 61% of Canadians who bought a home used a Tax-Free Savings Account (TFSA) for their down payment savings. This flexible account is available to all Canadians. Still, when we look at the data on the usage of programs explicitly designed to help first-time homebuyers, Canadians are leaving money (in the form of tax refunds) on the table.
When we adjust the data to only include first-time homebuyers, only 51% used the new First Home Savings Account (FHSA) for their down payment savings in 2023. The federal government introduced this account in 2022, allowing Canadians to save up to $8,000 per year tax-free and claim those contributions as a deduction on their income tax return.
This account is the strongest tool first-time homebuyers have for saving. However, Canadians are still prioritizing other accounts like the TFSA (with 63% of first-time homebuyers choosing the TFSA). This lack of adoption suggests there is still an education and knowledge gap related to the FHSA.
Home Inspectors Rose to Second Most Used Real Estate Professional
It takes a village to raise a family; the same can be said for buying a home. You’ll need to work with various professionals to complete your home purchase. Some professionals (like real estate agents) are extremely common, while others, like land surveyors, aren’t always necessary.
Real estate agents were the most hired professionals, with 66% of homebuyers engaging their services. Still, the most notable change from our 2022 survey is that Canadians use home inspectors more frequently in their purchases. In 2022, only 36% of Canadians indicated they engaged a home inspector for their home purchase. In 2023, 41% of home buyers used a home inspector, making these professionals the second most common real estate pro after agents. Home inspections are a valuable tool that help homebuyers detect defects in the home before finalizing the sale.
Why are home inspectors enjoying newfound popularity? This change is likely due to many markets in Canada shifting into buyer’s market territory, which means home buyers have more leverage to add conditions like home inspections to their offers without the fear that their offer will be rejected.
“It is definitely a result of a more balanced market,” says Daniel Foch, real estate expert and host Canadian Real Estate Investor podcast. “Less competition means buyers can negotiate more favourable terms on their offers, and home inspections are among those favourable terms.”
Homebuying By Generation
There are differences in how we buy homes by generation. Whether we’re buying as single people or together as a couple, there are some key differences.
First, boomers are most likely to buy a condo, while Generation X, millennials, and Generation Z are focused on detached homes. Boomers are less likely to view many homes before deciding on “the one.” The older generation tends to view between one and three homes before buying, while younger Canadians view between four and six homes before putting in an offer.
The most significant difference between the generations is who the different generations are buying homes with. For example, boomers are most likely to purchase while single, which makes sense given that many boomers are heading into retirement and may be divorced or widowed.
Generation Z is also more likely to buy as a single person, although they may have had help with their down payment. Gen X and millennials, on the other hand, are most likely to buy homes as part of a couple. These generations are likely to have or plan to start families and prioritize buying homes as part of a couple.
Regarding how we buy homes, we’re more alike than different. First, all generations ranked the family room or living room as the most important room in their home. All generations also browsed real estate listing websites the most when house hunting. Finally, all generations tapped their savings when saving for their down payment.
More Canadians Buying Homes with Friends or Family
Preparing to buy a home can take years, with many Canadians making their dream home list well before the home buying process. In fact, 68% of survey respondents reported that they started browsing real estate listings at least one year before starting their house hunt.
Looking at homes on the market well in advance is smart, as it allows you to acclimate to what’s available in your ideal neighbourhood and for what price. You can narrow down precisely what you’re looking for in a home, and when the right one comes on the market, you can pull the trigger. This extended research phase could explain why 37% of Canadians only view between four and six homes before making an offer.
Buying with Friends and Family Becoming Mainstream Admidst Higher Home Prices
Suppose we asked an AI program to tell us what a Canadian homebuyer looks like. It would probably produce an image of a couple buying a detached home. However, this image is no longer accurate in Canada. More and more homebuyers are finding creative ways to enter the housing market. A new and growing trend is buying homes with family or friends beyond a romantic partner. In our survey, 35% of Canadians said they purchased their home with friends or family.
Buying a home with friends or family is growing in popularity. The main draw is enabling Canadians who otherwise could not afford a home in their city to get on the property ladder. This type of buying can take place in a few ways, often parents purchasing with children or friends buying together.
While this is a creative approach, it has some risks, especially when moving on from the home purchase. “You need to be able to discuss and document the hard stuff with a lawyer before getting an approval,” says Calla. The mortgage expert notes that homebuyers need to consider the long-term implications of joint ownership.
If you’re considering buying a home with a relative or friend in the 2024 Canada housing market, consider the ramifications. What happens if one person wants to sell and the other doesn’t? What happens if one person’s romantic situation changes? Knowing your rights is key, says Calla. She says it’s essential to engage a real estate lawyer to lay out the steps taken in case of a disagreement.
Shopping for Homes on Social Media? More Homebuyers Are Doing It
Real estate agents are no longer the first stop when finding your dream home. 55% of Canadians browse real estate listings on their computer to find potential homes. That said, a new trend in shopping on social media is rising. In 2023, Canadians turned to platforms like Instagram (52%) and Facebook (47%) to find new listings.
The takeaway? Agents looking to help their clients find the ideal home shouldn’t shy away from leveraging social media to get the word out about new listings. That said, the classic real estate listing website still reigns supreme.
Home Purchasing Habits Prioritize Location and Negotiation
Once your finances are prepared and you’ve found the home of your dreams, it’s time to move forward with the home-purchasing process. While every home purchase is different, here are some trends we uncovered in the survey:
- 80% of Canadians negotiated when buying a home
- Fully detached homes were the most popular, with 42% of Canadians buying a single-family home
- The largest proportion of Canadians (24%) chose a 60-day closing period, compared to 30 days in 2022
- March was the most common month to buy a home, followed closely by February
Homebuyers Compromise on Must-Haves
In today’s housing market, you’ll need to be clear on which features of a potential home are wants, and which are needs. For example, you may want a home close to shops and services. On the other hand, you also need at least three bedrooms to accommodate your family. When it comes down to it, would you choose to compromise on location in favour of square footage?
Many Canadians need compromise when finding the right home. Ironically, the most important features of a home are also the most often compromised. When asked which home features were most important to 2023 homebuyers, location (53%), type of home (53%), and square footage (50%) were the highest ranked. Unfortunately, those were features buyers also needed to compromise on.
While it’s common to compromise to find a home, sometimes you can still find the perfect property. This happens by knowing what you are willing to give up and what you aren’t. For example, square footage was one of the most important features to buyers (50%), but the most compromised feature was the size of certain rooms (36%). A thrifty buyer could sacrifice square footage in bedrooms or the basement for a larger floor plan overall.
While compromising is inherent in buying a home, some buyers got lucky. 9% of Canadians said they didn’t compromise on anything and got their dream home. This isn’t the norm, says Foch. “People should not expect their next home to be their dream home, but they could eventually get there through deferral of gratification and making good financial decisions.”
Homebuyers Enjoy Longer Closing Periods
After you find a home, compromise on your must-haves, and negotiate the terms, it’s time to close the deal. Thankfully, you’ll have more time to close than in years past. The most common closing period has increased from 30 to 60 days.
When you take possession, you’ll need to walk through the property. The walkthrough ensures everything is as it should be, the home is in good condition, and the previous owner didn’t leave any debris behind.
While performing a walkthrough is a must on possession day, many homebuyers take additional steps to make their new property a home. For example, 55% clean the home, 40% move in furniture, 38% change the locks, and 38% set up their utilities. Performing home maintenance (35%), reviewing the home inspection (31%) and starting light renovations (30%) were less popular options.
Looking Back at 2023 and Ahead to the 2024 Canada Housing Market
Understanding what happened in the housing market in 2023 is critical to understanding how homebuyers bought homes. This understanding can help Canadians who plan to purchase property in 2024.
2023 marked a period of recovery in Canada as home prices rebounded (albeit) slowly from the price decreases seen after the steep interest rate increases made by the Bank of Canada in 2022. Many real estate markets moved into buyer’s market territory for the first time since before the pandemic. Canadian buyers took advantage of that, using the reduced activity to negotiate for home inspections, price reductions, and more extended closing periods.
That said, in many major urban centres, prices remained high. That meant Canadians turned to creative strategies like buying homes with friends or family, to enter the real estate market.
What does this all mean for the 2024 Canada housing market? The answer depends very much on when (or if) the Bank of Canada reduces interest rates. “I think the important theme in 2024 is how long we spend at current interest rates and what happens to the economy that makes the Bank of Canada cut rates.”
As for when that will happen, our guess is as good as yours. Predicting the rise and fall of interest rates is a hugely complex economic problem. But if rates come down in 2024, expect more buying activity and home supply as sellers on the sidelines put their homes on the market.
2024 Canada Housing Market Survey Details
The survey data used for the 2024 Canada Housing Market Survey was collected online between February 28, 2024, to March 8th, 2024.
The online survey about Canada’s housing market asked 800 respondents various opinions, self-reports and knowledge-based questions to measure their experience buying a home in 2023 and their steps to purchase a property.
The estimated margin of error is +/- 3 percentage points.
