Canadian real estate affordability deteriorated so fast, it will delay buyers by years. National Bank of Canada (NBC) crunched the numbers on how long it would take to save a down payment in Q2 2021. Not buy the home, but to just have the minimum required down payment to get a mortgage. Over one quarter, home buyers in some markets saw the time needed to save extend by years. That was on top of a timeline that already took up to three and a half decades to save the bare minimum down payment.
Canadian Months To Save A Down Payment
Today we’re looking at how long it takes to save the minimum down payment to buy non-condo housing. The savings are using 10% of the median gross household income for each region. Non-condo housing means any single-family dwelling (e.g. detached, semi, town, etc.).
The length of time is then expressed in years, with a small catch. For the time to be true, incomes need to keep pace with home prices for the whole period. The last part is obviously unrealistic, but not much more unrealistic than expecting 30 years of savings to buy a home, right? More likely home prices fall, or absurd inflation causes incomes to rise in line with prices. The latter sounds better but is usually so disastrous it causes the former as well — making it much worse. Got it? On to the data.
Canadian Households Need 9 Years To Save A Down Payment
Canadian households now need nearly a decade of savings to buy in the urban composite, a.k.a. a typical city. It would take 9 years of savings in Q2 2021, up a year from the previous quarter. That’s right, one year of savings to counter 3 months of activity.
In contrast, the long-term average since 2000 has been just 4 years, so now buyers are looking at double. Don’t let anyone tell you it’s always been this hard, because that’s just not true.
Minimum Down Payment For A Home In Major Canadian Markets
The number of years it would take to save the minimum down payment for non-condo housing in major Canadian real estate markets. Included is the long-term average since 2000.
Source: National Bank of Canada; Better Dwelling.
Toronto Home Buyers Need 27 Years To Save A Down Payment
Just a decade? That must sound like a deal to home buyers in Toronto, now looking at nearly three. It would take 27 years of savings in Q2 2021, up 2 years from the previous quarter. Since 2000, the long-term average was only 5.1 years. Today’s young adults are looking at 5x that. Good thing 57 is the new 30, right?
Vancouver Home Buyers Need 35 Years To Save A Down Payment
Greater Vancouver has always been unaffordable, but never quite like this. It would take 35 years of savings in Q2 2021, up 2 years from the previous quarter. The long-term average from 2000 is 12 years. Still very high normally, but today’s buyers are looking at three times that high rate for the entry ticket.
Montreal Home Buyers Need 4 Years To Save A Down Payment
It may sound like the norm to see the down payments soar across the country, but Montreal shows that’s not the case. It would take 4 years to save a down payment in Q2 2021, the same as the previous quarter. Since 2000, the long-term average has been 3 years, so you’re not looking at a crazy expansion. I mean, it takes a third longer, which is a very large number. A median household just won’t be near retirement with that change.
Hamilton Home Buyers Need 7 Years To Save A Down Payment
Hamilton real estate is now considered the frothiest market in Canada, and down payments reflect that. It would take 7 years of savings for a down payment in Q2 2021, an extra year from the previous quarter. Since 2000, the long-term average has only been 3 years. Home buyers are looking at double the time compared to the previous two decades of home buyers.
Calgary Home Buyers Need 3 Years To Save A Down Payment
Then there’s Calgary, which has one of the highest median incomes in the country and is affordable. It would take 3 years to save a down payment, the same as the previous quarter. That also happens to be the same as the long-term average. In other words, incomes are growing at least as fast as the size of a down payment.
Canadian home prices are soaring everywhere, and it’s much harder to buy today than it used to be. Some attribute this to low interest rates, but Montreal and Calgary prove that’s not the case. Both regions are seeing prices rise at a brisk rate, but they’re rising more in line with incomes. In contrast, cities like Toronto and Vancouver now take decades to save enough to get a mortgage.
Even if Toronto and Vancouver suffered a deep correction, home prices would still be out of reach. This begs the question, who’s going to provide liquidity at these prices? The top 10 percent of incomes can only buy so many homes.
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