Ontario millennials need to save for more than 20 years for a down payment on a house: report

A new report shows that home prices need to drop by more than $500,000 for millennials to afford a home in Ontario.

Generation Squeeze, a charity that fights for generational equality in the country, recently published a 56-page report called “Straddling the Gap 2022”, which looks at the disparity between home prices and earnings across the country.

The study looks at what Canada’s “top target” for house prices should be by looking at the gap between earnings and median house prices from 1976 to 2021, which was the latest year available for Association data. Canadian Real Estate Agency (CREA).

After analyzing the CREA data and comparing it to Statistics Canada’s annual revenue data, the report concludes that prices should stagnate “for many years, or even continue to decline moderately.”

“The number of years of work necessary to save [for] a 20 [per cent] The down payment on median-priced homes has grown alarmingly in many regions,” the report reads.

Across Ontario, median home prices were just under $900,000 last year.

Meanwhile, the median income of Ontarians between the ages of 25 and 34 has stayed about the same for decades, averaging about $50,000 a year. According to the latest data from StatsCanannual income was $50,800 in 2020.

For millennials to buy a home in the province, the report says median home prices need to drop $530,000, more than 60 percent of market value last year, so they can afford a mortgage that covers 80 percent. percent of the value .

Or, Ontario millennials will need to earn $137,000 a year, which is about $85,000 more than they currently earn on average.

ontario housing chart

“It takes 22 years of full-time work for a typical young person to save 20 [per cent] the down payment on a median-priced home,” the report says, which they say is 17 years older than when “today’s aging population” was their age. The report did not clarify which age groups are included in this definition.

The lack of affordability in the Greater Toronto Area (GTA) is even more pronounced.

Those who have their sights set on owning a home in the GTA will have to save an average of 27 years to make the same down payment on an average-priced home. That’s 10 more years compared to the average amount of time in Canada.

Median annual income has hovered around $50,000 in the region, with StatsCan Revealing 25-34 year olds in GTA grossed an average of $51,600 in 2020.

Meanwhile, median home prices in the region have skyrocketed to $1.1 million.

According to the report, these prices will have to fall by more than $750,000 for this age group to afford a mortgage that covers 80 percent of the home’s value at current interest rates.

gta housing graphic

“Or typical full-time earnings would have to rise to $172,000/year, more than triple current levels,” the report notes.

Rent is also high for those who can’t afford to buy, as the report notes that a two-bedroom apartment in the GTA costs $20,148 a year in 2021.

With how much millennials earn a year on average, rent makes up about 40 percent of their income.

However, house prices in the GTA are expected to drop slightly next year.

According to Re/Max Canada’s 2023 Real Estate Market Outlook, prices are expected to fall nearly 12 percent to an average of just over $1 million.

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