Housing affordability continues to cause distress for potential Canadian homeowners, according to a new CPA Canada-BDO Debt Solutions survey, but the building industry is having challenges of its own adapting to this reality.

Saving for a down payment was seen as the biggest barrier to home ownership for 32 per cent of respondents to the survey, conducted for CPA Canada and BDO.

“As uncertainty from tariffs settles in, we were noticing that there’s a bit of a slowdown in the housing market so we were trying to dive into that to get a picture for the consumer,” David-Alexandre Brassard, chief economist at CPA Canada, told RENX Homes.

Canadians are also being challenged by high costs of living, according to 43 per cent of respondents to the survey, conducted by Leger online between Feb. 7 and 10 among 1,590 randomly selected Canadians 18 years old and older.

Difficulties in saving for a down payment did not come as a revelation, according to Brassard.

“It’s not a surprise but personally, I have less of an issue if the challenge is getting the income to qualify for the mortgage, there’s more equal opportunity there than amassing the down payment, simply because there’s a lot of parental help in the down payment. That’s what we see for younger folks and that creates inequalities, that if the challenge is only qualifying for the mortgage, you can get there by getting a bigger income.”

On a macro level, this increasing unaffordability is being realized in the homebuilding industry this year, he said.

“The weakness of, especially the Ontario market, the construction level that we’re seeing now, Q1 2025, it’s very low. It’s multi-units building, pre-sale development that is really slowing down and showing how weak the market is.”

Amid slowdown, housing situation is changing

While this slowdown is being exposed, there are a few reasons things might be changing, said Brassard.

“The last two-and-a-half years, the rental market has been on fire. There was a lot of non-permanent immigration, so that spikes up the demand for rentals . . . We’re seeing that craziness die down a bit, but it’s still a landlord market. All the indicators on the rental front show very low vacancy rate. On the residential side, very low turnover.”

While the industry is often painted as struggling today, this is not entirely accurate. It’s the high-end housing market that is suffering the most, according to Brassard.

“It’s simply because the prices are so high that it’s hard for them to go up without a significant push on demand.”

Because of demographics, the homebuilding industry is struggling to react.

“Construction has flipped in the last few decades. We used to build more detached homes. We used to build around 60 per cent detached homes. Now it’s closer to 30 per cent so it’s been cut in half from just the early 2000s,” Brassard said.

“We’re building more and more multi-unit buildings. There’s a bit of a slowdown there and prices will follow. But on single-family homes, we’re going to create scarcity and the major issue is the levels of construction . . . We’re around 240,000 units per year.”

Source of household debt

Canadians’ high household debt is largely due to housing costs, he said.

“We’re in the top five when it comes to household debt in the world and promoters want to push up prices, and there’s no room for that. There’s quite a bit of — I call them horror stories — but pre-sales in the Toronto market are dropping in value drastically since people are buying a product for which the demand is not there, and the price is following.”

With all these economic headwinds, what is in the future for the construction industry, which remains “profitable,” according to Brassard?

“I see them pivot into building something else and probably some layoffs . . . We might see smaller players get out of the game. Are we going to see large players get out of business? I’m not entirely sure because the scale and timing of building large-scale, real estate projects are long-term . . .” Brassard said.

While governments are talking about increasing the level of supply, “systematic issues” remain that need to be addressed.

“There’s a way to streamline permits in cities to still get the housing that you want without the many months of delays, and really work with all levels of government to find out where the pain points are for builders and how we can streamline the process . . . The faster they can build, the more profitable they are,” he said.

Simply adding more housing stock, without a significant change in new home permitting, won’t solve the problem, Brassard warned.

“My only caveat, levels of construction have not moved that much in decades. They did during the pandemic: We reached a level that we’ve never reached in terms of housing construction, around 10 per cent more than we’ve had at peaks in the '70s. But along with that came a significant price hike on the construction side.”

“My concern when we talk about increasing housing, I’m just wondering what’s the capacity to do so without having a significant push-up in prices . . . But again, I’m skeptical about throwing money in(to) an industry to make sure that it does not translate into higher prices and inflation.”

Governments should also stop promoting such things as the first home savings account.

“I would like no more things to be done on the demand side such as the first home savings account. Let’s be honest, they’re being used by financially literate people who are able to save significant amounts and I’m not convinced it’s really driving housing affordability for most people," Brassard said.

"I want supply work rather than boosting demand because we don’t need to boost demand anymore."