Even with a budget of C$1 million (S$1.04 million), Ritu Choudhary and Nippun Goyal, a newly married couple living in Toronto, discovered that buying a house there would be impossible.
The competition inside the city and nearby was so stiff that they had to consider 50 properties, before finally outbidding everyone to pay C$995,000, or about US$730,000. The house had a leaky roof - it was also 50 miles (80km) from Toronto, in Hamilton, Ontario.
Canada's housing costs are among the highest in the world, driven, in part, by robust real estate markets in its largest cities, including Toronto and Vancouver, that have a global appeal.
But costs have also grown steeper in smaller cities, such as Hamilton, the country's steel making centre, which once promised affordability, but is now the fifth-least affordable place in North America for housing, according to Oxford Economics, a consulting and forecasting firm based in Britain.
Even as many markets in Canada cool because the central bank has raised interest rates to combat inflation, homes in most markets remain significantly more expensive than they were last year. Prices for single family homes in Toronto fell by 16.4 per cent between February and the end of August, but were still 7.7 per cent higher than in the same month last year.
The country's bubbling residential real estate market has become so frothy that as the pandemic eases, Canada finds itself in an economic Catch-22. It's grown so expensive to buy a home - prices have risen nearly 160 per cent for a detached home in the Toronto area in a decade - that younger Canadians would welcome falling home prices. But if prices fall too drastically - and they could if the central bank keeps raising interest rates - the market could crash, wiping out billions of dollars in real estate values and potentially dragging down the country's economy.
"I don't think there's an apocalypse out there," said Frank Clayton, a real estate economist and co-founder of the Center for Urban Research and Land Development at Toronto Metropolitan University. "But interest rates are going up a lot more than I think most people thought a few months ago."
In March, the Bank of Canada, like most central banks, began steadily increasing interest rates to try to tame inflation that accelerated after the Russian invasion of Ukraine. Last month the central bank's key interest rate reached 3.25 per cent, up from 0.25 per cent in February.
"Every time they go up, it's going to bring prices down," Clayton added, referring to home prices.
Canada's spiralling house prices have long been led by feverish price gains in Toronto, where the detached house price, adjusted for buying patterns, now sits at just under C$1.6 million, and in Vancouver, British Columbia, where it is at about C$1.9 million.
Like the real estate boom in many countries, Canada's was initially fuelled by historically low interest rates and then accelerated when affluent people trapped in their homes during the pandemic became flush with savings and sought bigger dwellings.
An analysis by the Canada Mortgage and Housing Corp., the government-owned mortgage insurer, found that prices surged near Toronto and Vancouver "partly owing to much higher international migration" between 2015 and 2019. For the Toronto area, before Covid swept the country in 2020, about 125,000 immigrants arrived each year into a market that was building about 33,000 new houses annually.
Another factor contributing to housing price increases is suburban sprawl. As governments attempt to restrict the building of single-family homes in cities - an effort to combat climate change by promoting development that reduces dependency on cars - Canadian families who want detached homes are going farther outside cities to find them.
A Bank of Canada study released this year found that a preference among buyers for larger spaces increasingly now only available in suburbs has narrowed the housing price between city and suburban real estate in areas such as Toronto.
Hamilton, an industrial city with a population of 570,000, was supposed to be different. With smokestacks dominating the skyline and vast mill complexes stretching for more than four miles along its Lake Ontario harbour, Hamilton is known as Canada's gritty steel capital, and often called "The Hammer".
Once looked down upon by many Torontonians, Hamilton's charms became more apparent to some as they sought to escape skyrocketing housing prices in Toronto. But as newcomers brought with them an upscale butcher shop, pricey burger joints, cafes and an organic grocer, interest in Hamilton exploded and drove up prices.
"When I told people that I was moving here, everyone was like: Hamilton, are you crazy?" said Bryan Adlam, who moved his real estate practice from suburban Toronto seven years ago when Torontonians started looking further afield. Now Hamilton has bidding wars and unconditional offers. "There's the original Hamiltonian people and then there's the transplants and there's a definite divide in the areas they live. But in the areas where they're overlapping, sometimes there will be friction."
When Choudhary, who works in e-commerce for a consumer products company, moved to Toronto from Mumbai, India, after marrying Goyal, a tech project manager, just over a year ago, they decided two people could not work remotely in his 550 square foot condo. Though it meant giving up easy access to nightlife, restaurants and cultural events, they would have to leave downtown Toronto to find anything within their budget.
Searching an ever-widening circle from the condo, they made 10 offers that were repeatedly topped by other buyers' bids, in one case by C$80,000.
In Hamilton, where they moved in August, some psychological adjustment has been necessary. "We were like kind of shocked and surprised at how quiet it could be," Choudhary said. "Nobody really stays out beyond 10 pm, even on weekends."
Attending an in-person meeting at her company's office in the heart of Toronto is now a 90-minute transit ride each way.
But all that, Choudhary said, has been offset by compensations such as having two extra bedrooms and nearly triple the floor space. Choudhary added "we were so excited that we had a whole backyard we had to get a barbecue, of course".
The couple's house-hunting difficulties bode poorly for homeownership rates in Canada. Census data released this month showed that the rate fell to 66.5 per cent last year from a peak of 69 per cent 11 years ago.
Canada defines families with unaffordable housing as those spending more than 30 per cent of their income on shelter. By the census agency's measure, just over 20 per cent of Canadian households were in that predicament last year. While that has led to plenty of rhetoric from across the political spectrum in Canada, there has been little in the way of concrete action beyond tax incentives and sales-tax rebates that, some argue, have only further turned up the heat on prices by enabling even more people to enter the market.
Jim Dunn, an urban geographer at McMaster University in Hamilton, is also director of a government-sponsored housing research group. He said that any government committed to providing affordable housing will have to take the politically unpalatable step of reversing several tax advantages for homeowners.
The resulting tax revenue could be used to build more public housing, something the federal government largely abandoned decades ago. Chief among the tax advantages Dunn wants eliminated is an exemption from capital gains taxes after the sale of primary residences.
He said studies have calculated that the cost of that exemption, and of other tax rules that do not capture homeowners' gains, amounted to six times all levels of government spending on public housing.
Outside the organic food market on Ottawa Street in Hamilton, Adlam said that house prices have tripled since he arrived in the city. And he has seen variations of the pattern spread through several communities hundreds of miles south-west to the tip of the province at the international border with Detroit, where the average home price is now C$912,681.
"Basically southern Ontario has become unaffordable," he said. "I have two clients I have right now whose budget is C$500,000 to C$600,000, which is not chump change," he said. "Are they going to be renters for life? Probably. Has owning a home become unattainable for someone on the lower income echelon? I would say, yes." NYTIMES