Despite the latest figures from Statistics Canada confirming that the inflation rate has dropped to its lowest level of 2.8% in over two years, many Canadians are still struggling with the high cost of living. The fall in inflation was majorly driven by the reduction in gasoline prices which dropped by 22% since last June. Accommodation costs are of major concern for many given the interest rate hikes that have driven up mortgage rates and average home prices that have continued to rise, year-over-year.
In May, the Canadian Real Estate Association (CREA) reported that the average home price had risen to $716,000 in April, up by $103,500 from January 2023. Even with the growing housing prices, supply remained low, further exacerbating the situation and making it harder for Canadians to find affordable housing.
Steep housing costs and the pricing on essential items have pushed many to opt to relocate to other countries where their money can stretch much further. A feature run by CTV News highlighted several families that had chosen to overcome the challenge of Canada’s high cost of living by relocating to more affordable nations like Barbados, Cambodia, Mexico, and the Philippines. From housing to food, energy costs to quality of life, the different families were able to justify their decision to relocate on several fronts.
Even as inflation dropped in June to the country’s target range, the cost of living remains high thanks to such contributors as groceries, which went up by 9.1%, year-over-year. The central bank is predicting that inflation will remain around the 3% mark over the next year, eventually dropping to 2% by mid-2025. With interest rate hikes being the chosen strategy to cut down demand in the market and make it more expensive for consumers and businesses to borrow, it has also had the unfortunate impact of forcing Canadians to pay more for their mortgages.
While the cost of living in many parts of the world can be much lower than in Canada, this often tends to correlate with lower incomes. The minimum wage in many of the most popular destinations for relocation is a fraction of what can be earned in Canada. This has made relocation a greater pursuit for those headed towards retirement as they can enjoy better value for money from their savings and pensions.
Associate professor of strategy and business economics at UBC’s Sauder School of Business, Tsur Somerville, noted that rent and mortgage payments in Canada had risen at a faster rate than incomes, especially in recent years. He however warned that an influx of foreign homebuyers to some foreign communities where there was inadequate housing supply could lead to average home prices being driven up within those localities.
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