It’s no secret that housing affordability is an issue in Toronto.
And now a new study, Straddling the Gap: A Troubling Portrait of Home Prices, Earnings, and Affordability for younger Canadians, by UBC’s School of Population & Public Health shows the severity of the housing prices, and how Canadians between the ages of 25 and 34 continue to struggle with the gap between earnings and real estate costs.
According to the study, 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 still dramatic.”
In fact, data from the report shows that average home prices would need to drop by nearly 50% for a typical person aged 25-34 to afford an 80% mortgage on average-priced homes.
Alternatively, they say earnings would need to double for this generation to afford the same home, which makes current housing unaffordable for young Canadians and newcomers.
Gen Squeeze’s analysis demonstrates that Canada’s national and local housing markets remain unaffordable for younger Canadians and newcomers. And “if housing markets are levelling out, they remain at untenably high levels.”
The gap in affordability is especially severe in Vancouver and Toronto.
The study states that in the GTA, the average home prices would need to fall $523,000 – two-thirds of the current value – to make it affordable for a typical young person to manage an 80% mortgage at current interest rates.
“Or typical full-time earnings would need to increase to $150,000/year – triple current levels,” it continues.
It also takes 21 years of full-time work for the typical young person to save a 20% down payment on an average priced home, which UBC says is 15 more years than when today’s ageing population started out as young people.
As a province, some of Ontario’s numbers are more encouraging, as it encompasses everywhere outside of Toronto’s bustling core.
But it’s still high.
The average home prices would need to fall $307,000 – over half of the current value – to make it affordable for a typical young person to manage an 80% mortgage at current interest rates, or typical full-time earnings would need to increase to $109,000/year – more than double current levels.
As for down payments, it takes 15 years of full-time work for the typical young person to save a 20% down payment on an average priced home – 10 more years than when today’s ageing population started out as young people.
Just get that extra guac… we’re a long way to go from that extra $150 K.