Ontario real estate has been on a seemingly endless upswing throughout the coronavirus pandemic, leaving many homebuyers priced out of their local markets and seeking housing affordability elsewhere. Indeed, Ontario’s suburbs and rural markets have absorbed much of the spillover, attracting homebuyers with their lower price points, higher square footage and green space galore. This new-found demand has put upward pressure on prices, but that does not mean all Ontario real estate markets are out of reach for first-time buyers, families and newcomers, as immigration to Canada kicks into high gear.
The latest data from the Canadian Real Estate Association shows the average home price in Canada fell by 12 per cent in the last year, to $632,802 in November 2022. Based on RE/MAX Canada’s 2022 Housing Affordability Report, there are still many major housing markets across Canada that sit below this national average price, dispelling the notion that housing in Canada is totally unaffordable, despite the country having one of the hottest real estate markets in the world.
Falling home prices are a trend that is expected to continue into 2023 as higher interest rates make mortgages more costly. Toronto, Ontario’s largest city by population, has some of the most expensive real estate in Canada, but Ontario has several options for affordable real estate as well. So, where can you get the biggest bank for your buck in the Ontario real estate market?
The Most Affordable Ontario Real Estate Markets
First, it is important to understand what determines an “affordable market.” Contrary to popular belief, affordability goes beyond the average home price, taking into account the level of income in relation to that average price. A recent survey conducted by Leger on behalf of RE/MAX Canada asked Canadians to define what affordable housing means to them. Thirty-eight per cent said housing affordability is a home they can afford that meets their basic needs, and includes some liveability elements, such as green spaces and restaurants. Digging a little bit deeper into the dollars and cents of affordability, 18 per cent of Canadians define housing affordability as allocating only 30 to 40 per cent of their monthly household income toward housing costs, including mortgage payments, property taxes and other housing-related expenses.
In Ontario, the 2022 income estimate is $71,852, based on the LifeWorks 2022 Salary Projection Survey. Using this estimate, the average monthly income in 2022 is $5,987,71. With this in mind, here are three major Ontario real estate markets that offer relative affordability – with two of them falling at or below that 40-per-cent allocation that classifies housing as “affordable.”
Finding affordable real estate in Ontario might seem daunting, but the province has a stronger real estate market than people give it credit for. The thing to remember is that home prices vary tremendously depending on the size of a city. That means a two-bedroom apartment in Toronto is going to be a lot more expensive than a two-bedroom apartment in Picton. The reason for this is that cities generally provide easier access to professional opportunities, especially for young families or students pursuing post-secondary education.
In general, purchasing real estate in a small city in Ontario is more affordable in terms of upfront costs and monthly mortgage payments. If you work in a larger city, you may find that living in a neighbouring smaller city and commuting is more affordable and desirable, even considering longer commute times. That said, it is important to do your research and determine what you can afford. Here are a few of the most affordable real estate markets in Ontario.
Thunder Bay, Ontario Real Estate
- 2023 Average Price: $338,366.25 (Estimate)
- Average Down Payment: $67,673.25 (Estimate using the 2023 average price)
- Average Mortgage Amount: $270,693
- Monthly Mortgage Payment: $1,674
- % of Monthly Income Allocated to Mortgage: 26.95%
After increasing over the course of 2021-2022, home sales in Thunder Bay are expected to decrease by five per cent in 2023. The increase was attributed to move-over buyers from more expensive urban areas, who have enough equity to outbid and drive prices up. Buyers were willing to push their budgets modestly higher to “win” the bid, according to Mario Tegola, local broker and owner of RE/MAX First Choice Realty. Now, downsizing seniors and first-time buyers are expected to drive market activity, with particular interest in income suites.
In an anecdotal ranking on affordability in the region (1 being the most unaffordable, and 10 being the most affordable), Tegola ranked Thunder Bay ranked at 6. However, despite its mid-scale ranking, locals are still concerned about affordability factors, with cost of living and inflation topping the list, followed by the impacts of low housing supply and economic/employment conditions.
The top three most affordable neighbourhoods in Thunder Bay are East End, Simpson-Ogden, and Downtown Fort William. In comparison, the top three least affordable neighbourhoods based on average residential sale price in the region are River Terrace, Mariday Park and Sherwood Estates.
Despite good local affordability, homebuyers have been exploring alternatives to traditional home ownership, with some choosing to rent a part of their primary residence to generate supplemental income. Others are opting to rent instead of buy in a challenging market plagued by a housing supply shortage. Currently, approximately 25 per cent of listings are experiencing multiple-offer scenarios, with 50 per cent per cent of homes selling over asking price.
Sudbury, Ontario Real Estate
- 2023 Average Price: $490,161.51 (Estimate)
- Average Down Payment: $98,032 (Estimate using the 2023 average price)
- Average Mortgage Amount: $392,128
- Monthly Mortgage Payment: $2,426
- % of Monthly Income Allocated to Mortgage: 39%
Since the beginning of the year, Sudbury has been experiencing move-over buyers coming to the region from larger cities or more expensive urban areas. As a result, average sales are expected to increase by 6.5% in 2023, with the seller’s market expected to continue. Additionally, the luxury home segment remained stable through 2022 and is expected to increase in 2023 due to a robust waterfront market.
When asked to anecdotally rank the region on an affordability scale (with 1 being the most unaffordable, and 10 being the most affordable), Cathy Gregorchuk, a former Sudbury RE/MAX broker, assigned the region a 7 rating, since it is still very affordable despite recent price increases.
Although Sudbury real estate is relatively affordable, the most significant factors impacting affordability in the region are low or diminishing housing supply; followed by rising interest rates and out of province/out of region buyers. There have been no improvements to affordability in the region in the last three years, the only factor of note is the first-time Home Buyers’ Plan, but it hasn’t shifted the needle, especially due to low inventory and high buyer demand.
Alternatives to traditional home ownership, such as co-ownership or the need to rent a part of the home for supplemental income have not been a factor in the area due to its relative affordability, even with rising home prices. Prospective buyers in Sudbury are most concerned about continuously rising interest rates and the relative higher prices of homes.
The top three most affordable neighbourhoods in Sudbury are Donovan, Gatchell, and Coniston. In comparison, the top three least affordable neighbourhoods based on average residential sale price in the region are Lo-Ellen, Lockerby and New Sudbury.
Buyers are concerned and are in a bit of a holding pattern at the moment with uncertainty looming in the back of their minds. Currently, approximately 65 per cent of listings are experiencing multiple offer scenarios; while 81 per cent of homes have sold over asking in the month of June alone.
Windsor, Ontario Real Estate
- 2023 Average Price: $649,278.01 (Estimate)
- Average Down Payment: $129,855 (Estimate using the 2023 average price)
- Average Mortgage Amount: $519,422
- Monthly Mortgage Payment: $3,213
- % of Monthly Income Allocated to Mortgage: 51.72%
Prices in Windsor are expected to plateau in the first half of 2023 before bouncing back in the year’s second half. In line with prices, sales should see a decline in the first half of 2023 before rebounding in the second half of the year. The trend of rising prices has been driven by move-over buyers from expensive urban markets since the beginning of the year, who have been seeking affordability in relation to their big-city origins.
Although Windsor is a relatively affordable region, factors continue to weigh on homebuyers, including economic/employment conditions; rising interest rates; and out-of-province/out-of-region buyers impacting demand and prices.
Since the start of the year, many first-time homebuyers in Windsor have started pooling finances together with friends and family as alternatives to traditional home ownership in order to afford a home. Prospective buyers in Windsor are anticipating prices to cool but are concerned about rising interest rates and not being able to afford a home.
The top three most affordable neighbourhoods in Windsor are Meadowbrook, Roseville Gardens, and Ford-Ferndale. In comparison, the top three least affordable neighbourhoods based on average residential sale price in the region are Walkerville, Downtown Windsor, and East Riverside.
With home prices in the region starting to cool – a trend that is anticipated to continue into 2023 due to rising interest rates and modestly higher supply – buyers may be able to enter the market a little easier.
Currently, approximately 35 per cent of listings are experiencing multiple-offer scenarios; while approximately 70 per cent of homes are selling over asking.
Finding an affordable place to live in Ontario is not as straightforward as in other parts of Canada. Still, there are markets throughout the province that are more affordable than the larger cities. With some research into the average income of an area compared to the price of its real estate, you should be able to find the perfect home. These stats should help you identify the best area for your family and your budget!