Home Buyers' Plan Turns Costly for Young Canadians Who Bought at Market Peak
The long-standing Canadian tradition of tapping retirement savings for a first home down payment has turned disastrous for young buyers who entered the market at its peak. The Home Buyers' Plan, a government-backed program allowing RRSP withdrawals of up to $60,000, has become what experts describe as a terrible financial bet for those who purchased when housing values were highest.
The Double Whammy of Declining Homes and Soaring Stocks
According to Canadian Real Estate Association figures, the average home sale price peaked at $816,720 in March 2022 before dropping to $673,335 by the end of 2025—a decline exceeding 17 percent. During this same period, the S&P/TSX Composite Index surged approximately 50 percent, creating a perfect storm of financial misfortune for those who withdrew retirement funds for housing.
Carl Gomez, chief economist at Centurion Asset Management, explained the predicament: "It's horrible. You take your assets that were growing, and you put them into something that's going down. The whole point is to borrow from your future on an asset that's going to grow at a tax-free, preferred rate. But it's really contingent on hoping that you're building your equity faster by doing this strategy."
How the Home Buyers' Plan Evolved
The Home Buyers' Plan has been actively promoted by policymakers and supported by real estate industry lobbying efforts that successfully increased withdrawal limits as housing prices climbed. The program's limit has grown substantially over the years:
- Originally $15,000 per person
- Currently $60,000 per person
- Doubled for couples purchasing together
For decades, the strategy proved remarkably successful, with Canadians securing homes that served as both residences and leveraged investments. Returns were often astronomical and tax-free under principal residence exemptions.
When the Strategy Worked Versus When It Failed
Mortgage broker Shawn Stillman and his wife exemplify the plan's previous success. They withdrew $15,000 each from their RRSPs in 2017 and repaid the loans within four years, while their home value increased by two-thirds over six years—what Stillman describes as "hitting a tax-free jackpot."
However, Stillman notes that circumstances have changed dramatically: "When interest rates were under two percent for a five-year mortgage back in 2021, an RRSP withdrawal made little sense. You could have left the money in your RRSP and probably gotten better growth."
The Diversification Problem
Gomez highlights a fundamental issue with the Canadian approach to housing investment: "For a long time, it was said that buying a house was your best financial move. You're basically putting all your eggs into one basket and not diversifying your resources. That's the biggest problem Canadians have had: they haven't diversified their asset base."
For those who borrowed at the market peak, the consequences are magnified. They've experienced losses in both their housing equity and retirement savings potential, creating what Gomez describes as a "remarkable reversal of fortune" for a strategy once considered virtually foolproof.
The current situation serves as a stark reminder that even government-endorsed financial strategies carry significant timing risks, particularly in volatile housing markets where peak purchases can coincide with declining values and rising alternative investment opportunities.
