Skip to main content

One of the smartest solutions to expensive houses turns out to have a costly downside.

In search of affordable houses, hordes of home buyers left big cities over the past two years and moved to the suburbs and smaller communities. All along, we knew that there would be an adjustment for these buyers as the pandemic eased and at least some were required to stop working at home and return to the office.

That’s happening now, along with a gas-pump gut punch. According to GasBuddy, the average cost of gasoline across Canada has gone from roughly $1.38 a litre to $1.80 in the past three months. That’s an increase of 30 per cent. The overall inflation rate most recently clocked in at 5.1 per cent, a 30-year high.

Gas prices were on the rise through much of the past 12 months, but Russia’s invasion of Ukraine pushed this trend into hyperdrive. Russia is a major oil producer and its exports have been disrupted by international sanctions.

The migration of home buyers from expensive urban housing markets has been guided by a “drive until you qualify” philosophy, which reflects the fact that prices decline as you move away from urban hubs. But the housing boom of the past two years has jacked up prices in cities large and small, the net result being that people have to drive further to qualify for a mortgage.

This is where high gas prices come into play. Even a few days at the office per week can mean hundreds of kilometres of commuting in traffic that prevents vehicles with internal combustion engines from working at peak fuel efficiency. If you live rurally, you may already be driving more to accomplish basic tasks such as picking up bread and milk.

Tips for improving your vehicle’s fuel consumption include using GasBuddy to find gas stations in your city or town with low prices, going easy on the accelerator when driving, coasting to red lights, inflating your tires properly, removing roof racks to improve aerodynamics and getting your vehicle tuned and the oil changed. But these suggestions are like telling people to use coupons to fight grocery store inflation. Helpful, but not decisive.

You could also trade your gas-burning vehicle for a hybrid or electric model, but that’s a big undertaking. Expect to pay a premium of several thousand dollars to buy an alternative-fuel vehicle compared with conventional vehicles.

At today’s fuel prices, it’s going to take less time than ever before to achieve long-term savings from a hybrid or electric vehicle over one with an internal combustion engine. But in the here and now, you could end up with sharply higher monthly payments at a time when almost everything you buy is rising in cost.

The most effective way to deal with high fuel costs is not to drive. For this reason, the flexibility to continue working at home is an early candidate for workplace perk of the year. Another thought: Ask your employer for a fuel subsidy – or funds to pay for a public transit pass.

Churn in the work force caused by the pandemic has left employers in some sectors struggling to retain and attract workers. But the opportunity to negotiate raises, bonuses and improved benefits won’t last indefinitely. A recent note to clients from BMO Economics highlighted how U.S. businesses have curtailed hiring and an intention to raise wages as a result of the escalation of the war in Ukraine.

Unless gas prices fall hard, some vehicle-related decisions may need a rethink. Two cars in your driveway? Maybe one will do, with a car-sharing service used as a supplement. Planning a driving trip this summer? For a worst case, budget the cost with gas at $2 a litre. Looking at buying a vehicle that needs premium gas? GasBuddy’s price quotes suggest a typical extra cost of up to 20 to 25 cents a litre for premium-grade fuel compared with regular.

And then there’s the preference many buyers have for large SUVs and pickup trucks. Does it make sense to step up to a hybrid or electric version of these already expensive vehicles, or move to something smaller?

Home buyers, driving until you qualify remains a smart way to find something affordable. But the very idea of affordability is being redefined in early 2022. There’s the cost of your house to consider, but also groceries, gas and so much more.

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.