A new report by Royal LePage delves into the purchasing power of a budget hovering around $1 million in Canada’s major housing markets, shedding light on the evolving landscape of real estate affordability.
 
Key findings
 
The report notes that the average home in Canada valued between $950,000 and $1,050,000 across all property types in December 2023 had 3.2 bedrooms, 2.1 bathrooms and 1,760 square feet of living space.
National trends indicate that the purchasing power of $1 million has remained relatively consistent year over year, owing to subdued market activity and modest price growth.
“Depending on the market that you are shopping in, a $1-million home can mean something very different. In Calgary, a budget of $1 million is considered the move-up price point for existing homeowners. In Vancouver, the same amount is often the starting point for entry-level buyers,” says Karen Yolevski, COO of Royal LePage Real Estate Services Ltd.
“Years ago, a $1-million budget could buy a generous amount of square footage and access to sought-after neighbourhoods in almost any market. Over time, however, we have watched the purchasing power of $1 million vary more widely between cities. These days, this budget can buy a luxurious detached home in one location, or a two-bedroom condominium in another.”
Homes of all property types valued between $1,950,000 and $2,050,000 in December 2023 typically offered 3.7 bedrooms, 2.6 bathrooms and 2,501 square feet of living space, reflecting the impact of a higher budget.



 
Challenges for buyers
 
Buyers are not without challenges. Rising interest rates and stringent mortgage qualification standards have increased monthly carrying costs, even though the housing supply shorting has caused property prices to plateau.
Mortgage lenders require a minimum 20 per cent down payment — at least $200,000 — for homes priced over $1 million, presenting a significant barrier to entry for first-time buyers. And, higher qualification thresholds due to elevated interest rates have limited the amount banks lend, particularly in high-priced markets.
“The greatest barrier to entry when buying a home is often the down payment. For first-time homebuyers living in communities where entry-level homes start at $1 million or close to it, getting a foot on the property ladder can be a considerable challenge. This is why it’s become increasingly common for parents and family members to step in with financial assistance,” Yolevski explains.
 
Public perception
 
A Royal LePage survey revealed that 64 per cent of Canadians feel a $1 million budget for a home is sufficient to meet their needs. The report notes there’s a vast discrepancy between what that amount will buy in various parts of the country.
Buyers in larger urban areas must compromise more than smaller locations to get a home they can afford. Specifically, residents in British Columbia and Ontario are more likely to feel that $1 million is inadequate for their housing needs compared to those in Alberta and Quebec.
 
Housing affordability: The new relocation driver
 
“Finding employment has historically been one of the primary drivers for Canadians relocating to regions outside of major cities. Now, as housing affordability remains front and centre for many, we are seeing families move to new locations specifically to find a home within their budget, and prioritizing employment second,” says Yolevski.
“The increased flexibility that the remote work movement has afforded many people makes this possible. We saw this phenomenon play out during the height of the pandemic, as the mass adoption of remote working enabled Canadians to migrate across the country.”
 
Future outlook
 
As interest rates are expected to decrease, increased buyer activity may drive property prices higher, exacerbating affordability challenges.
“Without a significant increase in supply, especially in cities like Toronto and Vancouver, the standard for a $1-million property will continue to evolve away from large homes,” Yolevski points out.