Average home costs four times more than young Metro Vancouverites can afford: study

A 25-to-34-year-old on a typical salary can only afford $250,000 home, based on current interest rates, says Generation Squeeze

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The average home in Metro Vancouver is priced at more than four times what a typical 25-to-34 year-old can afford, according to a study released June 13 by housing advocacy group Generation Squeeze.

The million-dollar-plus price tag for an average home in the region would have to be reduced by $795,000 – about three-quarters of the current value – to under $250,000 to be achievable for a 25-to-34-year-old on a typical annual salary, according to Straddling the Gap.

That’s based on the buyer spending 30% of their income on mortgage payments; having a 20% down payment; and on current available interest rates.

Alternatively, a buyer’s typical full-time earnings would need to increase to $200,400 per year – nearly four times current levels – to afford the average Metro Vancouver home, said the report. It added, “Based on the last decade, actual earnings are expected to be flat.”

Gap

Source: Generation Squeeze

The report also said that a buyer between the ages of 25 and 34 saving for a 20% down payment on an average priced home ($1,050,000) would take 29 years, if saving 15% of their typical pre-tax income each year. That’s longer than some of those buyers have been alive, and 23 years more than in the mid-1980s when some of their boomer parents were buying homes.

A look at the region’s MLS reveals only a couple of dozen homes currently available under the affordable $250,000 price tag, not counting manufactured homes and fractional ownership.

Across B.C., the report said that average home prices would need to fall $452,000 – about two-thirds of the current value – to achieve the $250,000 price tag affordable for a typical young buyer, or salaries would need to triple. The number of years to save for a down payment on an average home in the province (just over $700,000) is 19 years.

Generation Squeeze is working with the Canada Mortgage and Housing Corporation and makes a number of recommendations to help improve general affordability for young Canadians. These include:

·       Reducing or removing other large, non-housing expenses – such as child care and parental leave, student debt and tuition, transit costs and more;

·       Building more purpose-built rental housing to accommodate the fact that people are renting longer;

·       Capture housing wealth windfalls through taxation, and remove tax-sheltered gains in housing;

·       Revitalize B.C.’s economy to improve earnings, with less reliance on real estate and development for GDP;

·       Find new measures to de-risk the market in order to bring down home costs in ways that support all Canadians, including those who already own property; and

·       Protect the housing market from inflation in regions where affordability has not already been lost.

Glacier Media Real Estate