The affordability squeeze is only getting harsher, according to various observers
Homeownership is a rapidly fading prospect for those who have yet to enter the market, according to Umair Muhammad, researcher at non-profit housing advocacy group Generation Squeeze.
“Housing is increasingly out of reach, especially for younger people and for newcomers in Canada,” Muhammad told The Globe and Mail.
Recent data from the National Bank of Canada seems to support this conclusion. With a savings rate of 10% at the national median income of $78,000 annually (before taxes), an average Canadian household would need as long as six and a half years to save a minimum down payment of approximately $50,000 on an average-priced home ($771,407).
This is a far cry from the roughly three years and four months needed to save for a down payment in 2012.
Read more: Analysis: Pandemic-era housing boom now stalling
The situation is even more precarious in the largest markets. Buyers hoping to get into the Vancouver housing market would need a whopping 363 months, or more than 30 years, to save for a down payment (up from 67 months in 2012).
Those looking for a Toronto home would need approximately 337 months (up from 47 months in 2012) to save for an average-priced home in the region.
A recent report by Robert Hogue of RBC Economics stressed that Canadian housing affordability levels are at their worst in at least a generation. RBC’s aggregate unaffordability measure for Canada went up by 3.7% to reach 54% in Q1 2022, its most inflamed since the early 1990s.
“Higher rates will affect virtually every buyer across the country, hitting them with steeper monthly mortgage bills that make it harder to acquire properties,” Hogue said. “Buyers in the priciest markets will be challenged most. Elevated property values – and, more important, larger corresponding mortgage sizes – heighten sensitivity to interest rate movements.”
