Canadian Households Now Need Up To 34 Years of Savings For A Downpayment

The first hurdle to buying a home in Canada is getting much higher – saving for a downpayment. A National Bank of Canada (NBC) analysis shows it took a record number of months to save a downpayment in Q4 2020. Households need to save for the longest period in history, passing even the late 1980s bubble. The national record is still just a fraction of what’s needed in Toronto and Vancouver.

About The Data 

Today we’re looking at NBC’s data on the number of months someone has to save for a downpayment. The income used is the median number for each region, which may skew the months lower. A first downpayment typically happens “early” in one’s career, when they make less. The savings rate is assumed to be a realistic 10% of household income. The minimum downpayment is the lowest a bank will accept, which is 6% at the national level. Got it? Let’s look at how each region fares, starting with the national numbers.

Canadians Need To Save The Longest In History To Buy A Home

The number of months to save a downpayment for a home across Canada has reached a record high. The median household needs 60 months of savings for the minimum downpayment. According to NBC data, this beats the 57 months briefly experienced around 1989. By 1992, that number had dropped down to 26 months. Now it’s up to 60 months, increasing by almost 58% since the Great Recession. Remember, this is at the national level. It’s faster to save in some markets, and much worse in others.

Canadian Months of Saving For A Downpayment

The number of months a median household has to save for the minimum downpayment in each region.
Source: NBC, Better Dwelling.

Toronto Homes Need Up To 24 Years of Savings

Buying a home in Toronto can now take up to 24 years, if you’re a typical household. The median household needs to save 289 months for a downpayment on a non-condo home, which is just over 24 years. For a condo apartment, they can get a downpayment together in about 4.25 years. Income in the region increased 1.3% over the past year, but the price of non-condos and condos increased 5.5% and 1.2%, respectively. The gap is generally widening, unless you’re in the market for someone’s old AirBnB. 

Vancouver Homes Need Up To 34 Years of Savings

Buying a home in Greater Vancouver can take over three decades if you’re a typical wage earner. The median household in the region needs to save 409 months for a downpayment on a non-condo home. This works out to just over 34 years. For a condo apartment, you’re looking at a slightly more reasonable 58 months, which is just a touch under 5 years. Income increased by 1.0% in 2020, while non-condo and condo dwellings fell by 0.1% and 0.4%, respectively. Things were getting better, but the gap is so big it barely makes a dent in the total outcome.  

Montreal Homes Are Much More Affordable… Currently

Montreal’s high flying real estate seems like a total deal in contrast to Toronto and Vancouver. The median household needs to save 39 months to make a minimum downpayment on a non-condo. This works out to just a touch over 3 years. Condo apartments are a little more affordable, with it taking 29 months to save. Incomes  increased 1.3%, which is much weaker than the 6.6% and 3.5% increase seen in non-condos and condos, respectively. Fairly reasonable for a downpayment, but at the current rate that might not be the case if things don’t slow down. 

Low interest rates made carrying a mortgage affordable, but inflated downpayments. If you don’t have access to intergenerational wealth, the drop didn’t mean much to buyers in big cities. If it takes 34 years to save a downpayment, you would be 54 if you made the median income at 20. In other words, interest rates can be 100% or 0%, it doesn’t matter if you don’t have a sufficient downpayment. It definitely didn’t help young people with affordability in Toronto or Vancouver. It only inflated the cost of the homes. 

Those without an account at the Bank of Mom & Dad are taking advantage of low rates though. They’ve had to go far outside of the city, where it takes less to clear the downpayment barrier. This was likely another contributor to the exodus of young people from Toronto and Vancouver. Low interest rates potentially leading to young people leaving big cities. That’s a new one.

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  • Tom Wolfe 3 years ago

    However the bank of Mom & Dad wont be liquid without divestment or death. Until then, Canadians help their kids borrow by leveraging their homes. In one of the most significant – not discussed – changes in Canada, we have moved from a period of sharing generational wealth, to a period of sharing generational debt.

    • SH 3 years ago

      Sharing generational debt – well that’s the Boomer way isn’t it? Even those few who are willing to help their kids (who have it 10x as hard as they did) aren’t quite selfless enough to do it with cash by downsizing. They want the big house AND the sale proceeds from that same big house at the same time.

  • Bob Walter 3 years ago

    Are they calculating it by the amount that the average Canadian family is away from insolvency each month? I believe that was mentioned to be 200 dollars.

    It should be easy to save those dollars into an 25000 dollar downpayment.

    Also if there’s such a hard time saving, what about maintenance cost etc. If a downpayment is hard, then how are these people going to change their leaking roof in 10 years.

    • CF 3 years ago

      They will borrow against the house to repair said house. If the government continues to propel asset prices (which is what everyone is counting on) then work is pretty meaningless if your equity is going up faster than any work you could ever do.

      • Bob Walter 3 years ago

        Why not borrow your down payment against the future equity then of your purchase. It makes sense. House markets only ever go up, especially in Canada. /s

  • More info 3 years ago

    Would be nice if a bit more info was included for each region – like a table showing assumptions for income (or savings) and deposit used in these timelines.

    It’s possibly much worse then indicated for many due to the high rent prices, mentioned in your last article. Was that aspect included in this? Or did they assume 30% of income for each region could cover rent, leaving enough to save that 10%?

    We sure are leaving a mess and major challenges for younger generations, young couples, new families, and anyone having to restart life. Sickening the government continuously turns a blind eye

    • Trader Jim 3 years ago

      Not sure what else you need. They say typical, which is the NBC benchmark. I guess that might not be clear if you don’t know what that is.

      The rest is literally in the description. Savings are 10% of a median household income. Generous considering 40% goes to taxes, and 30% to shelter. You get 30% to save, invest, support yourself.

  • Robert 3 years ago

    And despite 34 years required to save for downpayment, we have 30 families bidding for each house that goes on sale now.
    The math that you are doing calculating these years is not applicable in real life. It does not account for property ladder (i.e people upgrading their place and having equity as downpayment for new place).

    • Bob Walter 3 years ago

      You are hitting the exact point of the article: Class divide between rich and poor will grow. You will get a bigger pool of have-nots.

      People with houses won’t be selling their house to “fresh” people in the market but to a limited pool of people who already own real estate.

      Of those people with real estate in Canada, they will not be able to upgrade that much because real estate prices have grown much faster than their incomes typically. So they have to move to a different city or be content with an equal like house that they currently own, for more money.

      So are we targetting rich overseas investors (thrash the Canadian dollar) to keep the housing market afloat? How long before those can get a better deal in another country?

  • Rob 3 years ago

    According to a single kidney can fetch $262 000 USD. on black market.
    Sheesh, any good RE agent would be able to tell you that. With a family of 4 prices still have a way to go. Be creative, happy house hunting.

  • Sam 3 years ago

    Holy crap…..I got 3 kids……technically I could get a nice backsplit in Richmond Hill if all 5 of us…..thanks for the tip…lol

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