Rising housing prices have been a topic of discussion in the United States for quite some time. One of the plights of being an American seems to be the difficulty of buying a home, but is it just as hard in other places? How does this situation compare to Canada?
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GOBankingRates spoke to Fergus Hodgson, a director at Econ Americas, in addition to diving into some statistics to give a comparison of how the American housing market compares to the Canadian one. One thing to note: At the time of this article, one American dollar was worth $1.32 in Canadian dollars. Read on to see whether it would be cheaper to move to Canada and buy a home.
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America’s Median Home Value: $346,000
The median home value in the United States is around $346,000, according to Zillow.
The state with the highest average home value is California, where the value is around $746,000, according to Zillow. Part of the reason homes are so expensive in California is that there is currently a housing shortage in the state. To add salt to the wound, current building codes make constructing a home very expensive.
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Canada’s Average Home Price: $487,540
According to WOWA, the average price of a home in Canada in November was CA$646,134, which is $487,540 in U.S. dollars.
“Homes in Canada appear to be about 19% more expensive, after the currency conversion,” Hodgson said.
The most expensive province to buy a home in Canada is British Columbia, coming in at CA$964,246 per home on average.
“That face value, however, neglects to mention other important considerations, such as household income,” Hodson said. “Since Canadians earn less and, in general, pay more in taxes, they face a more daunting task of covering housing costs.”
Why Are Canadian Homes More Expensive?
Similar to issues in California, Canada’s process for building new homes makes them pricier.
Hodgson said, “The chief reason Canada’s housing is more expensive is the greater barriers to entry for new construction: more urban containment, lengthier approval processes and costlier licensing. Any reduction in supply elevates the market price.”
Another contributing factor is the interest rate in Canada, which was close to zero for a while. This made buying a home more attractive and added more fuel to the lack of supply fire.
Interest rates have since increased; and, as a result, prices have begun dropping, but the Canada Mortgage and Housing Corporation doesn’t expect the average price to drop significantly, suggesting homes will be expensive for quite some time.
Does the Financing Process Play a Role in Price Differentiation?
Applying for a mortgage in Canada is similar to the United States, though it takes slightly longer to process in the U.S.
However, Hodgson said, it’s not really the processing that makes homes more costly in Canada.
“Both have sponsorship and promotion of mortgages that further elevate prices by artificially increasing buyer purchasing power,” he said. “However, I do not see these elements as causing the meaningful pricing disparity between the two countries.”
Where Are the Cheapest Places To Buy Homes in Canada?
Outside of British Columbia, Hodgson said, there are many provinces where buying a home is more affordable.
“Alberta and Quebec are two provinces with more affordable options, such as Quebec City and Edmonton,” he said. “If you are willing to live in cities with populations below 250,000, there are many options, such as Regina, Saskatchewan; Trois-Rivieres, Quebec; and Fredericton, New Brunswick.”
For reference, Alberta’s average home price is CA$449,362, which is well below the national average. Quebec’s is slightly higher at CA$467,108, but still much more affordable than homes in British Columbia.
Some of the smaller cities Hodgson named have much lower prices; Regina houses sell for around CA$295,000 on average.
To put things in perspective, in the United States, one of the cheapest places to buy a home is in Iowa, where the average value is $207,215, per Zillow, and the median list price is around $231,000. In the more affordable regions, the United States and Canada are fairly comparable.
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This article originally appeared on GOBankingRates.com: The Average Cost of a House in the US vs. Canada
