Average home prices in Canada are more than double what younger Canadians can afford, according to new research that looks at the state of housing affordability in every province and the major cities within them.
Released by Generation Squeeze, the study shows Canadians between the ages of 25 and 34 continue to straddle a massive gap between housing prices that remain at near-historic levels in key parts of the country and average earnings for this age group that have been relatively flat.
Data in this report show that average home prices in Canada would need to fall to $223,000–about half of the current value–for someone 25 to 34 to be able to afford an 80 per cent mortgage. Alternatively, typical full-time earnings for this age group would need to increase to $93,400 per year, which is nearly double current levels.
It now takes a typical young person 13 years to save a 20 per cent down payment on an averaged priced home in Canada, compared to the five years it took when today’s aging population started out as young adults in the 1970s.
“Despite recent nominal declines in housing prices compared to previous years, the gap between the cost of owning a home and the ability of younger Canadians to afford it is at critical levels. If housing markets are levelling out, they remain untenably high,” said Dr. Paul Kershaw, lead author of Straddling the Gap: A Troubling Portrait of Home Prices, Earnings and Affordability for Younger Canadians, and founder of Generation Squeeze.
Not surprisingly, the study shows the housing affordability gap for younger Canadians is most severe in Vancouver and Toronto, where housing prices are four and three times, respectively, more expensive than what a typical younger buyer can afford. However, the study also shows that problems extend to places like Victoria, Kelowna and many other Canadian cities.
Jessie Morton and her husband Rhys of Delta are just one of many young couples looking for affordable housing. They currently live in a suite in Rhys’ parents’ home.
“It’s been challenging to get in the market,” she said. “Because we chose to get married at a young age, one of us is always studying, so we switch off–one of us is working and one of us is in school full-time—and that leaves us with only one income and one part-time income.
“We just don’t have our full income potential coming in. We have looked and if we could be paying full market rent it would be in the Fraser Valley or out of province. We are thankful that we have this opportunity with family. Otherwise it would be impossible.”
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