Why living in Canada is so expensive

Living in Canada entails significant financial demands, as the country consistently ranks among the most expensive places to reside globally. Key contributors to this high cost include soaring housing prices in cities like Vancouver and Toronto, inflated expenses for essentials such as groceries, utilities, transportation, and healthcare, and notably expensive internet services.

Factors such as limited competition, high infrastructure costs, regulatory complexities, and bundling practices drive up internet prices, further burdening Canadian households. This discussion will delve into these three critical aspects, shedding light on the factors behind Canada's costly living conditions.

Housing Costs

Housing prices in cities like Vancouver and Toronto are particularly high. Limited housing supply coupled with high demand, fueled by factors such as immigration and urbanization, has led to inflated prices. Additionally, rental costs can be steep, especially in urban centers.

Certainly, here's some data to support the points made about housing costs in Vancouver and Toronto:

Vancouver:

According to the Real Estate Board of Greater Vancouver (REBGV), the benchmark price for all residential properties in Metro Vancouver was around $1.2 million in January 2022. This includes detached homes, townhomes, and apartments.

Rental costs in Vancouver have also been high. According to the Canada Mortgage and Housing Corporation (CMHC), the average rent for a two-bedroom apartment in Vancouver was around $2,800 per month in 2021.

 Toronto:

The Toronto Regional Real Estate Board (TRREB) reported that the average selling price for all home types in the Greater Toronto Area (GTA) was over $1.1 million in January 2022. This includes detached, semi-detached, townhomes, and condominium apartments.

Rental costs in Toronto have been on the rise as well. According to the CMHC, the average rent for a two-bedroom apartment in Toronto was around $2,300 per month in 2021.

These figures demonstrate the high cost of housing in cities like Vancouver and Toronto, where limited supply, high demand, and other factors contribute to inflated prices for both buying and renting properties.

Cost of Living 

Canada has a relatively high cost of living compared to many other countries. Expenses for groceries, utilities, transportation, and healthcare can add up quickly.

Groceries: According to Numbeo, a website that collects and compares cost of living data worldwide, the average cost of groceries in Canada is relatively high compared to many other countries. As of January 2022, the index for groceries in Canada was 64.43, where 100 represent New York City (excluding rent). This indicates that groceries in Canada are about 64.43% of the cost in New York City.

The cost of specific grocery items can vary depending on location, but generally, prices tend to be higher in urban areas compared to rural regions.

Utilities: Statistics Canada provides data on the average monthly expenditures of Canadian households. According to their Survey of Household Spending for the year 2020, the average annual expenditure on electricity, natural gas, fuel oil and other fuels, water, and other municipal services (excluding internet) was approximately $3,226 per household.

However, it's important to note that utility costs can vary widely depending on factors such as geographic location, household size, and energy consumption habits.

Transportation: The Canadian Automobile Association (CAA) provides annual estimates of the cost of owning and operating a vehicle in Canada. According to their 2021 report, the average annual cost of owning a compact car in Canada was approximately $9,500. This includes expenses such as depreciation, fuel, maintenance, insurance, and licensing.

Public transit costs can also vary by city. For example, in Toronto, the Toronto Transit Commission (TTC) offers various fare options including single-ride fares, monthly passes, and discounted fares for seniors and students.

Healthcare: The Fraser Institute, a Canadian public policy think tank, provides data on healthcare costs in Canada. According to their report "The Private Cost of Public Queues for Medically Necessary Care, 2021," the average Canadian family spends $12,631 per year on public healthcare insurance premiums and taxes, representing a significant portion of overall household expenditures.

Out-of-pocket expenses for healthcare in Canada can also include costs for prescription medications, dental care, vision care, and other services not covered by the public healthcare system.

Internet Price

Previously, we had written an article about “Why is the internet so expensive in Canada.” Internet prices in Canada are often considered expensive due to several factors: 

Limited Competition: Canada has a relatively small number of major internet service providers (ISPs), which can lead to less competition in the market. With fewer players, there may be less pressure to lower prices or improve services to attract customers.

High Infrastructure Costs: Building and maintaining internet infrastructure, such as fibre optic networks or cable lines, require significant investment. Canada's vast geography and low population density in many areas make it expensive to deploy and maintain these networks, especially in remote or rural regions.

Regulatory Environment: Regulatory policies in Canada can influence internet pricing. Some argue that regulations favour incumbent ISPs, making it difficult for smaller or newer providers to enter the market and compete on price and quality of service.

Lack of Wholesale Access: In some cases, smaller ISPs in Canada may rely on wholesale access to larger ISPs' networks to provide services to customers. However, access to these networks may be limited or costly, which can affect the ability of smaller ISPs to offer competitive prices.

Bundling and Price Discrimination: ISPs in Canada often bundle internet services with other products such as television and home phone services. While bundling can provide convenience for customers, it may also make it difficult to compare prices and limit options for standalone internet services.

Investment in New Technologies: Canada's ISPs are continually investing in upgrading and expanding their networks to keep up with increasing demand for higher speeds and better service quality. These investments may be reflected in the pricing of internet plans.

The high cost of living in Canada can be attributed to various factors across different aspects of daily life. Housing costs are inflated in cities like Vancouver and Toronto due to limited supply, high demand, and soaring property prices. Additionally, expenses for groceries, utilities, transportation, and healthcare contribute significantly to the overall cost of living. 

Internet prices in Canada are considered expensive due to factors such as limited competition among internet service providers, high infrastructure costs, regulatory environment, lack of wholesale access, bundling practices, investment in new technologies, and taxes and fees. These combined factors contribute to the perception of Canada as an expensive place to live, making it challenging for many Canadians to afford a comfortable standard of living. 

Addressing these issues may require a multi-faceted approach involving government intervention, regulatory reforms, and increased competition to alleviate the financial burden on Canadian households.