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The Canadian housing market has experienced a dramatic correction since its 2022 peak: “benchmark” prices have fallen by about 20% nationwide, with declines exceeding 30% in some areas.
Yet for many Canadians—and especially those aged 18–34—this drop is not enough to make housing affordable.
Why hasn't such a sharp correction been enough to restore affordability? Let's explore the causes, consequences, and some possible solutions, keeping things practical and useful.
This significant decline largely erases the exceptional price increases that occurred during the pandemic, but it does not erase the accumulated disconnect between prices and incomes.
1) A correction that primarily brings prices back to their pre-pandemic levels
Many economists explain that the recent drop primarily reflects a return to normal after the surge of 2020–2022. In other words, rather than a true “reset” to historically affordable prices, what we're seeing is an adjustment following a period of runaway growth. As Robert Hogue (RBC) notes, the figures seem dramatic, but they follow an even more dramatic rise—which leaves many households still far from being able to afford a home.
2) Incomes Have Not Kept Pace
A major part of the problem stems from the fact that household incomes have not risen at the same pace as housing prices over the past decade. Mike Moffatt and other observers point out that prices have “decoupled” from incomes. Thus, even after a 15–20% drop, many households remain unable to come up with a significant down payment or afford high monthly payments without family support or salaries well above average.
3) Major cities remain out of reach
The problem is particularly acute in major urban centers: estimates show that, in Vancouver, some households would theoretically have to spend up to 88% of their income on housing costs, and in Toronto, about 63%. These ratios are simply unsustainable for many families without making major sacrifices in other areas of spending.
4) Uncertainty and Buyer Behavior
Falling prices have created a paradoxical environment: although conditions appear less strained than at their peak, uncertainty is prompting many potential buyers to postpone their purchases, waiting for prices to fall further. This hesitation fuels a “lopsided” market where supply is increasing and transactions are stagnating, complicating the stabilization process.
5) Costs Beyond the Purchase Price
Beyond the listed price, buying a property involves a down payment, notary fees, taxes, insurance, and often high monthly mortgage payments if interest rates rise. Many young households have little accessible savings: without assistance (such as family gifts or loans from parents), access to homeownership remains very limited.
What can be done to improve the situation?
- Increase the supply of affordable housing: build more medium-sized, high-quality, affordable housing, particularly in areas well-served by public transportation.
- Targeted support for first-time homebuyers: assistance with the down payment, shared-ownership programs, or mortgage products tailored to young households.
- Wage and tax policies: Encourage increases in real income through training, job mobility, and tax measures that promote access to housing without widening inequality.
- Land-use regulations and densification: Simplify and expedite urban planning rules to allow for more residential development close to services.
In summary: The 20% correction in the Canadian market is significant, but it is not enough to offset a decade of divergence between prices and incomes. For housing affordability to cease being a distant ideal for the majority of young adults, coordinated efforts will be needed—including the construction of affordable housing, targeted assistance, and economic measures that boost incomes. Change will require time, political will, and pragmatic solutions tailored to local realities.
