Housing Affordability Squeeze Persists for First-Time Buyers in Canada (2025)

For many Canadians hoping to buy their first home in 2025, the dream is slipping further out of reach. Despite moderating inflation and cautious optimism around interest rates, housing affordability remains at its weakest level in decades. Rising prices, higher qualifying rates, and stagnant wage growth continue to lock thousands of first-time buyers out of the market.

The State of Affordability

According to the latest reports, the share of income required to cover ownership costs is still near record highs. In major cities like Toronto and Vancouver, households are spending more than 60% of their income on housing expenses, far above the traditional affordability benchmark of 30–35%.

Even in smaller markets such as Calgary, Ottawa, and Halifax, affordability pressures are mounting as prices have climbed steadily while wages have failed to keep pace.

First-Time Buyers Hit the Hardest

• Higher Down Payments: With the average Canadian home price hovering around $720,000, even a 10% down payment requires over $70,000 in savings—an impossible target for many young families.
• Stress Test Impact: The mortgage stress test still requires borrowers to qualify at two percentage points above the contract rate, adding to the barriers for new entrants.
• Rising Debt Loads: Many potential buyers are already burdened with student loans, auto loans, or credit card balances, leaving little room to take on large mortgages.

Real-Life Example

Take the case of a young couple in Mississauga earning a combined household income of $120,000. Even with solid credit scores, they are struggling to qualify for a modest townhome priced at $800,000. The stress test requires them to prove affordability at nearly 7%, pushing their buying power down to under $600,000.

Market Responses

• Developers: Some builders are shifting focus to smaller units, stacked townhomes, and micro-condos targeted at first-time buyers.
• Government Programs: The federal First-Time Home Buyer Incentive (FTHBI) and RRSP Home Buyers’ Plan continue to provide support, but uptake remains limited due to tight eligibility.
• Lenders: Alternative lenders are offering more flexible options, but often at higher rates that risk pushing buyers into unaffordable debt.

The squeeze on first-time buyers has broader implications for Canada’s housing market. Without steady inflows of new buyers, the market risks stagnation at the entry-level, which could slow resale activity and impact overall housing demand. For policymakers, addressing affordability remains critical not only for young Canadians but for the long-term stability of the market.

For now, the Canadian dream of homeownership remains a distant goal for many first-time buyers, with affordability challenges unlikely to ease until income growth or significant housing supply catches up.