Why some Vancouver homebuyers may need 83 years to save for down payment
If you want to save for a down payment to buy a detached house in Vancouver, you might have had to start decades ago.
Zoocasa, a real estate agency, looked at the minimum down payments required for a detached house in cities across the country.
Then, they calculated how many years an average-income household needs to save five per cent of its after-tax income each year.
“The gap between Canada’s most and least affordable major cities has never been wider, and for aspiring homeowners, the city you live in may matter more than how much you earn,” reads a blog post from Zoocasa in which they broke down their analysis.
In Canada, homes under $500,000 require a five per cent down payment. But as they go up in value, they require bigger and bigger upfront contributions.
If the home is between $500,000 and $1,499,999, buyers have to pay five per cent of the first $500,000 and 10 per cent for the rest.
If a home is worth $1.5 million or more, the minimum down payment is 20 per cent of the full price. If you pay less than that, you need to pay for mortgage default insurance, where the insurance premium is often added to the mortgage principal.
In Vancouver, with the average detached home costing $1,835,900 and home-buyers needing to pay at least 20 per cent of that upfront, a minimum down payment is about $367,180.
Zoocasa looked at the median after-tax household income in Vancouver, which was $87,640 per year in 2023. If a household saved five per cent of that a year ($4,382) towards a down payment, they could be doing that for 83 years and 10 months.
“A 25-year-old saving five per cent of their after-tax income today wouldn’t have enough until they were nearly 109. At that pace, you’d cross the finish line long after the race was over,” reads the blog.
How are Canadians affording homes?
According to a survey from the Canada Mortgage and Housing Corporation (CMHC), 41 per cent of Canadians used gifts or inheritance to help them with their down payments.
In 2023, Statistics Canada reported that the median inheritance Canadian homeowners received was $85,100.
Zoocasa also suggested that people use a First Home Savings Account, which allows them to contribute $8,000 a year, up to $40,000. It has tax-deductible contributions and tax-free withdrawals for a first-time home purchase.
The real estate company also advised people to “consider more affordable markets” if they can work remotely.
If that isn’t feasible, Zoocasa suggests ‘rent-vesting’, which is where someone continues to rent while buying an affordable investment property to “let it build equity.”
How are other Canadian cities faring?
Vancouver is the worst city in Canada when it comes to saving for a home down payment. Behind it is Toronto, where Zoocasa found that it could take 72 years and seven months to save up for a minimum down payment of $313,709 for a detached house (the average price is $1,568,543).
Meanwhile, the most affordable city in Canada to buy a detached home is Winnipeg, with an average price of $456,232 and a minimum down payment of $22,812. If an average household (earning $75,880 after tax) saved $3,794 a year, they’d be saving for six years.
The second most affordable city is Edmonton, where the average cost of a detached home is $571,372, a minimum down payment is $32,137, and the length of time to save is just over seven years.
Are you trying to save up for a down payment for a home in Vancouver? How are you doing it? Email vancouver@dailyhive.com and let us know.