If you’re a Canadian between the ages of 25 and 34 chances are you’re having difficulty finding a home you can afford.
Straddling the Gap, a new report released by non-profit organization Generation Squeeze, says that for millennials across the country housing affordability is simply not within reach.
According to the report, millennial Canadians aren’t earning enough to keep up with the country’s housing prices. To bridge that gap, this age group would need to almost double their average income, or conversely, the average home price would have to be cut in half.
Paul Kershaw, the report’s main author, said during an interview with CBC News that ‘these are massive numbers’ that are ‘troubling’.
The study examines what housing affordability looks like in each Canadian province and their major cities.
Some Provinces, Cities See Higher Gaps
Not surprisingly, the gap between earnings and home prices is widest in British Columbia and Ontario, especially in the large cities of Vancouver and Toronto.
Data from the report shows that the average cost of Vancouver homes for sale is four times the amount that any millennial could ‘safely’ afford, while the average cost of Toronto homes is three times what they could manage to pay.
Millennials in Vancouver would need an annual salary of $200,400 to afford the average home in the city, while in Toronto, millennials would have to make $150,000 per year. The time required for millennials to save a 20% down payment in the current market is 29 years in Vancouver and 21 years in Toronto.
Other cities are not immune to the high gaps, with Victoria, Kelowna, Hamilton, Kitchener, Edmonton, Calgary, Halifax, and Montreal also cited in the report as being tight markets. Kershaw noted:
“Sometimes I think we think it’s only Vancouver or only Toronto and this report is showcasing for both provincial and especially federal policymakers, we see unaffordability going [far wider].”
Saskatchewan, Manitoba, and the Maritime provinces haven’t experienced quite the same discrepancy between wages and housing prices that other areas have. For instance, it would require just eight years for millennials in Manitoba to save a 20% down payment in the current market and only five years for millennials in New Brunswick to do the same.
Past and Present Comparisons
The report also looked at how the gap has widened since 1976 when today’s aging Canadians were just starting out as young adults looking to buy a home.
In today’s national market it takes about 13 years for someone aged 25 to 34 years to save a 20% down payment for an average priced home. Forty years ago, it took just five.
While millennials have lower interest rates available to them than offered four decades ago, housing prices have increased significantly and typical earnings for people 25 to 34 years of age have remained pretty much the same over the 40-year time frame.