Canadians will often debate whether riding the stock market rollercoaster or buying property is the better investment.
And while we all know real estate values have risen, there’s been precious little data to show the power of property ownership to generate wealth. Until now.
A new study from Statistics Canada says that for the past four decades real estate prices have been moving at seven times the pace of real wages.
This figure alone would explain why Canada – along with many other mature Western economies – now has a significant generation gap in terms of wealth accumulation through property ownership.
The inability of wage growth to match real estate values has left younger Canadians struggling to get on the property ladder.
The study focused on data from 1981 to 2024, and it says real full-time wages grew 24% in that period, which is barely 0.5% a year. If you’ve been a gig worker or part-time worker, the data is more sobering. Real wages have risen 6%.
During this same period, and adjusting for inflation, home prices across Canada have increased by more than 160%, according to Statistics Canada.
The data shows home prices and wages tracked similar growth paths until 2002 when suddenly property values began to accelerate.
While homeowners may support policies that perpetuate price growth, real estate agents are hearing increasing concerns about the ability of young Canadians to enjoy the same opportunity as older generations.
The Canadian Mortgage and Housing Corporation (CMHC) says 12% of the buyer market so far this year has been made up of first-time buyers, an increase of 2% on last year’s total.
A similar economy and property market, Australia, currently has more than 25% of its buyer market made up of first-time purchasers. That country has a greater number of grants and schemes for first homebuyers.
Here are some of the schemes available in Canada to support the first-time homebuyer:
Home Buyers’ Plan (HBP): First-time homebuyers can withdraw up to $60,000 from their Registered Retirement Savings Plan (RRSP) tax-free to purchase a home. This limit was increased from $35,000 in April 2024. Withdrawn funds must be repaid within 15 years. Tax penalties apply if you don’t.
First Home Savings Account (FHSA): Individuals can save up to $40,000 tax-free with an annual contribution limit of $8,000. Contributions are tax-deductible and purchase-related withdrawals are non-taxable.
Home Buyers’ Amount: This program offers a non-refundable tax credit of up to $1,500 if you’ve purchased a “qualifying” home in 2024 or later. You must not have owned a property for the previous four years.
New Housing Rebate: Homebuyers generally – not just first-time buyers – may be eligible for a rebate on the federal portion of the GST (goods and services tax) or HST (harmonized sales tax) paid if they purchase or construct a new home. Rebates vary depending on location and value.
Land Transfer Tax: If you live in Ontario, first-time homebuyers may qualify for a $4,000 rebate on the provincial land transfer tax. In Toronto, you may be eligible for a larger rebate as the city imposes its own land transfer tax.