Guides
Nov 19, 2024

2024 Guide to Homeownership In Canada

The Canadian housing market is in the middle of a storm—one that’s been brewing for years.

2024 Guide to Homeownership In Canada

The Canadian housing market is in the middle of a storm—one that’s been brewing for years. High interest rates, poor planning, and skyrocketing demand have finally collided, leaving many feeling squeezed out of the market. But don’t lose hope. With a bit of planning and some clear goals, owning a home isn’t as out of reach as it seems.

Here’s how we got here:

Canada underestimated its population growth, and since 2016, the pressure on the housing market has been relentless. Adding fuel to the fire, more people are living alone, and seniors are staying in their homes longer. The result? Less availability and a surge in prices.

On top of that, the country’s economic situation, inflation, and rising gas prices are making it harder than ever to save for a down payment. Fixed expenses are eating into paychecks, and with residential construction material prices jumping nearly 60% since 2019, the cost of building new homes has soared. The endless red tape that delays residential projects only pushes prices higher, tacking on an average of $2,600 to $3,000 per unit for every month a project is delayed.

This toxic mix of pricey homes and restrictive mortgage rates has driven housing affordability to the brink.

But it’s not all doom and gloom. The market is nearing its breaking point, and the upcoming announcement from the Bank of Canada (BoC) in June could offer some relief. If rates drop by the expected 0.25bps, we could see more cuts before the year’s end. The government has also capped new temporary permits for foreign students and workers, which could help cool demand. Plus, both the government and banks are working on plans to finance and expedite the construction of new residential developments across Canada.

In the meantime, there are still ways to save for your dream home, even in this challenging market. Let’s break down the options:

  • RRSP (Registered Retirement Savings Plan): The government recently increased the withdrawal limit for the First Time Homebuyer Program from $35,000 to $60,000.some text
    • Pros: More funds for your down payment, reducing your mortgage balance and payments.
    • Cons: If you're on a tight budget, remember you’re borrowing from your future self, and those funds need to be repaid, adding to your monthly expenses. Fail to repay, and you could face a hefty tax penalty.
  • FHSA (First Home Savings Account): A solid way to save for a down payment, allowing you to set aside up to $8,000 per year and $40,000 total.some text
    • Pros: Contributions are tax-deductible, and withdrawals are tax-free (as long as you follow the rules).
    • Cons: You must adhere to all government restrictions on the use of these funds.
  • TFSA (Tax-Free Savings Account): A flexible way to save money for any reason, including your future home.some text
    • Pros: No tax penalties on withdrawals, and no need to prove how you’re using the funds.
    • Cons: Contributions are made with after-tax dollars, so there’s no immediate tax credit.
  • Regular Savings: Setting up automatic contributions to your savings is a straightforward way to build towards any goal.some text
    • Pros: No regulations on deposits or withdrawals.
    • Cons: Interest rates on savings are low, and there are no tax benefits.
  • RentFund: If you're renting and planning to buy a home in the future, this is a new and effortless way to save without worrying about taxes or penalties. With 5% of your rent payments going into your “RentFund” for a down payment, why not add RentFund to your existing savings plan or use it as a stepping stone on your homeownership journey?some text
    • Pros: Easy to sign up, boosts your savings, and helps you reach your goal faster.
    • Cons: Requires a membership, but the benefits far outweigh the cost.

In conclusion, everyone’s financial situation is unique, and there’s no one-size-fits-all solution. Some may have savings ready to go, while others are struggling to figure out where to start. Whether you're in a position to leverage your RRSP, TFSA, and FHSA accounts or need a starting point like RentFund, remember that small, consistent steps can make a big difference. RentFund can be your first step towards a solid savings plan or a powerful addition to the strategies you already have in place. The more you save for your down payment, the less you'll spend on housing in the long run.

Sources:

Related articles

Browse all articles