It is well known that the affordability of real estate in Canada is deteriorating, but it is hard to imagine. The latest Affordability Report from the National Bank of Canada (BNC) can help you do that. They calculated the numbers on the time it takes to save for the minimum down payment on a house without a condo. In the third quarter of 2021, it takes double the usual time for a median household to save. It’s all over the country, with expensive markets that take up to 36 years to save the minimum needed.
A down payment on Canadian real estate takes 9 years of savings
Canadian households looking to buy a home with the median income need a decade of savings. It takes 104 months (9 years) of savings in Q3 2021 to save the minimum down payment for a house without a condo. To say this is unusual is an understatement. Since 2000, the average has only been 49 months (4 years). It takes more than twice as long as usual.
We know: “… but the prices will not stay the same, it is a useless exercise!” This is the email we receive from real estate agents every time we publish National Bank estimates. This is a good idea if you are unsure of the economists’ argument.
The metric tells us how long it would take to save a down payment if wages and house prices moved together. It’s a snapshot to highlight where the numbers are if things don’t get worse or better – just where the market is. Markets change and 36 years of constant growth is unrealistic. They only underscore how far affordability was from historical standards.
Vancouver Real Estate now takes 36 years to save a down payment
Real estate in Vancouver is one of the least affordable on the planet and it has sort of found a way to get worse. It takes the median household 431 months (36 years) to save a down payment in the third quarter of 2021. This is an increase from 410 months in the previous quarter and the average since 2000 is 147 months (12 years). Saving a down payment takes 3 and a half decades, which is 3 times worse than normal.
Canadian real estate: it’s time to save on down payments
The number of months a median household in each Canadian city would need to save the minimum down payment required to buy a home without a condo.
Source: BNC; Better accommodation.
Toronto home takes 28 years to save down payment, 5 times more than normal
Toronto has deteriorated further, which is impressive for the least affordable city in North America. It takes 330 months (28 years) for a household to save a down payment in the third quarter of 2021, compared to 318 months in the previous quarter. The average since 2000 is only 64 months (5 years), so it is more than 5 times longer than normal. This is the second largest gap between the market and historical standards in Canada.
Victoria Real Estate is the most disconnected market in Canada
Victoria receives a special shout for the biggest deviation from normal price dynamics. It would take 350 months (29 years) to save the down payment on a house without a condo. The average since 2000 is only 68 months (6 years). This is slightly more than the 5x deviation that Toronto sees.
Edmonton and Winnipeg are the only two markets without a huge disconnect
Not all Canadian real estate markets are much worse than historical standards. They are all located in the Prairie provinces. In Edmonton, it takes 30 months (3 years) to save a down payment in the third quarter of 2021, compared to an average of 25 months (2 years) since 2000. Winnipeg came in at 29 months (3 years) compared to 22 months (2 years)) using the same measurements. They are both less affordable than usual, but not to the extent of other markets.
Such a big disconnect for home prices doesn’t last forever, but it can feel so. At five years and over, Canadian real estate is the second longest bubble in the G7. It is not by accident, but Canada is spending a lot of energy on inflating prices. He even often calls measures known to raise prices “affordability measures”.
In fact, financial experts are discussing how parents should plan to save a down payment for their children in retirement. Not exactly a discussion that usually takes place in advanced economies.