Interest rates have remained stubbornly high for most of 2023, and with two more Bank of Canada announcements coming later this year, homebuyers and sellers alike are feeling uncertain about the housing market. This hesitancy has allowed inventory to build, especially in the Greater Toronto Area (GTA), and as a result, has created a more balanced market with home price growth slowing down.
Despite prices being far lower than when they peaked in 2022, affordability is still a key concern for Canadians, especially those living in the most expensive provinces. According to the Canadian Real Estate Association (CREA), the average home price in Ontario was $908,000 in August 2023. Though this is a 2.1% drop from June 2023, when the average home price was at its highest so far this year, it is still higher than what the average Ontarian can likely afford.
Enjoying our content? Subscribe to our free weekly newsletter to get real estate market insights, news, and reports straight to your inbox.
In order to find where the most affordable areas are in Ontario, Zoocasa compared the average home prices in August 2023 in 28 cities across the province and calculated the average monthly mortgage payment required for a home bought at the average price in each city.
The Most Affordable Homes Are All Outside of Central Ontario
As long as buyers are flexible and willing to look well outside of the GTA, there are plenty of affordable cities in Ontario with homes for sale below $600,000. In fact, the top four most affordable cities, Sault Ste. Marie, North Bay, Sudbury, and Bancroft & Area, all have benchmark prices under $500,000. The top four most affordable cities are unchanged from a few months ago when we last conducted this report, but Simcoe & District has now grabbed the fifth spot which formerly belonged to Kingston & Area, now sixth.
The most affordable city is Sault Ste. Marie with a benchmark price of $295,400 in August 2023 and an average monthly mortgage payment of $1,407. The last time we conducted this report, in July 2023 using May 2023 data, the average monthly mortgage payment in Sault Ste. Marie was $1,330. The increase in monthly mortgage payments can partly be attributed to the benchmark price increasing by nearly $8,000 from May, however, higher mortgage rates also played a role in the change.
Notably, Bancroft & Area had the largest 1-year price drop decreasing by 10.5% from $557,200 in August 2022 to $499,000 in August 2023. The only other area to have a significant drop in price from 2022 was Simcoe & District, which experienced a 3.7% decrease from $575,500 in 2022 to $554,200 in 2023.
Other new additions to the most affordable list are Rideau-St. Lawrence, Quinte & District, Huron-Perth, and Grey-Bruce-Owen Sound, in that order. All four regions have benchmark prices between $560,000 and $580,000 and average monthly mortgage payments between $2,685 and $2,760.
Higher Interest Rates Impacting Affordability
In May, the average discounted 5-year fixed mortgage rate was 4.29% but it has now risen to 5.49%. The Bank of Canada’s overnight lending rate was also lower in the spring; in May the overnight lending rate was at 4.5% and since July that number has reached 5.0%, with the possibility of a further increase still on the table.
As a result of higher interest rates, even though some cities that have lower benchmark prices from May have higher monthly mortgage payments. In North Bay, the second most affordable city, the benchmark price decreased from $409,300 in May to $402,000. Despite this, the average monthly mortgage payment increased from $1,893 to $1,915.
Sudbury, the third most affordable city, followed this trend as well. The benchmark price in May in Sudbury was $451,000 and the average monthly mortgage payment was $2,086, while in August the benchmark price dipped slightly to $450,900 and the average monthly mortgage payment increased to $2,148.
Our real estate agents are here to help you find a home all across Ontario. Give us a call to learn more about inventory in your real estate market.
