
Are you dreaming of an affordable home in Canada? Brace yourself for a long wait. According to a new report by Oxford Economics, housing affordability won’t improve significantly until 2035—and for cities like Toronto and Vancouver, it might be even longer. To restore balance, Canada needs 4.2 million new homes by 2035, but challenges like worker shortages and economic risks make this goal daunting. Here’s what you need to know about where the market is heading and how it could impact your plans.
Affordability Crisis: A Decade-Long Struggle
Housing affordability in Canada is stuck in a challenging cycle. While upcoming cuts to mortgage rates might provide a temporary sense of relief, they’re expected to drive home prices higher—a short-lived solution that could leave many buyers frustrated. Oxford Economics predicts affordability won’t return to manageable levels for at least another decade, with Toronto and Vancouver likely staying unaffordable indefinitely.
Building requirements: 4.2 million new homes are needed by 2035 to restore balance, but only 3.6 million are expected to be completed—leaving a shortfall of 600,000 units.
Key forecast: The national Housing Affordability Index (HAI) is expected to hover above the affordable range (90–110) until 2035.

Rising Mortgage Rates: What’s Ahead?
While the Bank of Canada is cutting interest rates aggressively—down to an anticipated 2.25% by mid-2025—it won’t significantly help new buyers. Fixed mortgage rates, which are tied to bond yields, are already lower than variable rates and are expected to stay stable until 2025. However, bond yields and mortgage rates are forecasted to start climbing in 2026, potentially pushing borrowing costs even higher.
- Fixed mortgage rate forecast: Expected to stay near 5.4% through mid-2025.
- Variable mortgage rates: Influenced by the Bank of Canada, with minimal impact expected on affordability.
“Don’t expect mortgage rates to drop further,” warn the economists. “Affordability gains are likely temporary.”

Why Housing Prices May Keep Rising
The combination of lower rates and longer amortizations—up to 30 years—may initially boost affordability, but it comes at a cost. Increased leverage could push home prices even higher, especially in urban centers where demand outstrips supply. Meanwhile, slower population growth may help temper price increases over time, but the effects will take years to be felt.
- Vacancy rate challenges: Canada’s vacancy rate dropped to 6.9% in 2023, well below the equilibrium of 9%, adding pressure to the housing market.
- Suppressed household formation: High unaffordability has delayed household formation for many younger Canadians, with 600,000 households suppressed as a result.
For perspective: The affordability squeeze is a result of years of cheap credit, government bailouts, and excessive borrowing. Unwinding these pressures will take time, and patience will be key for prospective buyers.

What This Means for Buyers, Sellers, and Investors
- Buyers: If you’re waiting for home prices to drop or mortgage rates to improve significantly, you may need to rethink your timeline. Consider locking in today’s rates or exploring opportunities in less expensive markets.
- Sellers: With affordability remaining a challenge, pricing your home competitively could help you attract serious buyers in this market.
- Investors: Cities like Toronto and Vancouver may remain a solid bet for long-term gains, but diversifying into more affordable regions could provide better returns.
Takeaway: The Path Ahead Is Tough but Navigable
Canada’s housing market faces an uphill climb to restore affordability, but understanding these trends can help you make informed decisions. Whether you’re planning to buy, sell, or invest, staying ahead of the market is crucial.
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