Toronto Real Estate – As house prices in Toronto have increased dramatically over the past two decades, it has become much more difficult for young people, or “Millennials,” to buy a home. Just how long that takes was the subject of a recent study that puts some municipalities in the Greater Toronto Area (GTA) as among the most expensive cities in Canada to buy a home.
As we know, buying a home usually starts with a down payment, minimally five percent of the sale value. On houses worth more than $600,000, the down payment increases as a percentage of the purchase price.
Calculating how long it takes to afford a down payment is a formula that ponders house prices, average salaries, interest rates, and our propensity to save. The study was prepared by Point2 Homes after doing a cross-Canada poll of 9,000 households.
The report gives an average house value of $870,599 in Toronto and the corresponding down payment is $62,056. The average household salary, meanwhile is $67,880 and our propensity to save is a mere 4.4 percent, or some $2,987 annually. This requires 21 years of saving to afford the above-mentioned down payment of $62,056. That assumes, of course, that real estate prices will not increase over these next 21 years.
And if you think that houses are expensive in Toronto, prices are sky high in some other parts of Canada. West Vancouver takes the cake; an average house there costs over $2.5 million and just the down payment alone is a whopping $508,260!
Perhaps surprisingly, the average salary in West Vancouver is little more than in Toronto and the same calculations give an absurd 160 years of saving before Millennials can afford a down payment there. The nearby City of Vancouver sits at 89 years and some cities in the GTA follow close behind.
Oakville, with its average house price of $1,074,230, will see Millennials take 72 years to save toward the down payment of $214,846. The picture is similar for Richmond Hill with average house prices there of $1,033,754 and 69 years to make the down payment.
On the other end of the spectrum, the most affordable city in Canada is also in Ontario: Timmins, where it will only take 24 months for Millennials earning $99,630 annual salaries to afford the $8,921 down payment on an average house worth $178,421. Trois-Rivières, QC and Cape Breton, NS rival Timmins in house affordability.
The average house price is more less in Trois-Rivières ($160,948) than in Timmins ($178,421), however Timmins has higher average salaries. Other Ontario cities such as Sault Ste Marie, Chatham-Kent, and Thunder Bay also feature among the 20 most affordable cities in Canada for buying a home.
The report also highlights how many Millennials have unrealistic assumptions about how much it will cost for a down payment and are not saving enough towards a house purchase.
A precise definition of “Millennials” seems difficult to find, but the label is often used to describe the cohort born between about 1990 and 2005.
Point2 Homes describes itself as “an international real estate search portal, a division of Yardi Systems Inc. Our original research, insights and in-depth analysis of the real estate market have been featured in major media publications across Canada and the USA.” More info: www.point2homes.com