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‘Saving For A Down Payment Has Never Been Worse,’ Says National Bank Of Canada

Got 34 years to save up for a house?
Home For Sale Real Estate Sign in Front of Beautiful New House in the Snow.
Feverpitched via Getty Images
Home For Sale Real Estate Sign in Front of Beautiful New House in the Snow.

The threshold every buyer has to meet to own a home ― the minimum down payment ― has reached Canada’s highest level on record, a new report says.

With house prices rising at their fastest pace in 11 years, it would take a median-earning household 60 months to save up a minimum down payment on a house today, according to National Bank of Canada’s latest housing affordability monitor.

That’s the longest it has been in 40 years of home-affordability records, topping the previous peak at the height of the 1990 housing bubble.

“At a national level, there has never been a worse time to accumulate the minimum down payment,” economists Kyle Dahms and Camille Baillargeon wrote.

The time needed to save for a down payment on a house in Canada has reached a record high, even above that seen during the 1990 housing bubble.
National Bank Financial
The time needed to save for a down payment on a house in Canada has reached a record high, even above that seen during the 1990 housing bubble.

National Bank’s estimates assume a 10-per-cent savings rate, and a 6-per-cent down payment.

Broken down by city, famously unaffordable Vancouver takes top spot for the country’s least accessible housing market. At the median household income, it takes 58 months to save up for a condo down payment there, or 409 months for a detached home ― roughly 34 years.

In Toronto, it would take 51 months to save up for a condo or 289 months (roughly 24 years) for a detached house. Contrast that with Edmonton, where a condo takes 15 months and a detached home 28 months.

Months needed for down payment
HuffPost Canada
Months needed for down payment

What these numbers really mean is that you can’t actually buy a home in these markets on an average income, unless you are trading up from a home you bought when prices were lower, or get help with the down payment.

But if you’re already in the market, you may be finding it easier to pay your mortgage these days. Thanks to falling interest rates in the pandemic, mortgage payments have come down for three straight quarters, the National Bank report said.

And the forecasts aren’t calling for much relief for homebuyers soon. In a report in mid-January, Royal Bank of Canada predicted that the benchmark price of a home in Canada will rise another 8.9 per cent this year, to $669,000.

Watch: Second-home real estate booms amid COVID-19. Story continues below.

“The pandemic changed some dynamics — it drove many buyers to the suburbs, exurbs and beyond, ground immigration to virtual halt, triggered a downturn in big cities’ rental markets and caused households to build up their savings—but it didn’t dial down the market’s heat,” RBC economist Robert Hogue wrote.

“We expect this to largely continue in 2021.”

National Bank’s economists expect rising prices will soon overtake falling mortgage rates, and monthly mortgage payments will likely start to rise again.

However, most forecasts of rising house prices came out before the latest Statistics Canada data showing the country’s economy accelerating more than expected.

The possibility that Canada’s economy could return to normal faster than expected has many experts saying Canada could see interest rate hikes sooner than expected, which could dampen the housing market’s strength going forward.

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