Some 15 years ago, it took the average Canadian worker about a year of savings to be able to make a down payment for a house. Today, that figure has doubled with the saving period that could extend up to 102 weeks to gain the financial capacity required to buy a home.
According to the new report from Mortgage Professionals Canada, the situation has made it difficult for young Canadians gather enough savings for their first home.
The fall 2016 survey result by Mortgage Professionals Canada the steep rise in property values means that down payments on the average home has more than doubled when contrasted to the income the average worker earns.
A further analysis of the situation by the Canadian Real Estate Association shows that today, a down payment equates 102 weeks of the average wage in Canada --- a double value compared to 15 years ago.
We spoke with property expert Richard Morrison from TurboTap.org who said said “It’s a simple math that says incomes have not increased in proportion to rising house prices. He added that it now take an increasingly longer time for first time buyers to gather enough capital necessary for a down payment.”
Richard also pointed out that even at the time estimate to amass fund for a mortgage deposit, it’s impractical for a first time home buyers to save every money they earn towards making a down payment, especially if when they are facing multiple offers
, like in Vancouver. And with some not earning an average income, the implication is it will take an even longer time for some to make enough savings.
The report also shows that first time buyers have maintained a consistent rate of 20 percent down payment of the property value.Stricter mortgage laws…
But a down payment isn’t the only thing to first time buyers have to worry about in today’s Canada real estate market
Last October, the country’s Finance Minister Bill Morneau
introduced new mortgage rules requiring property buyers who make a down payment of less than 20 percent to be eligible for the central bank’s five-year fixed interest rate of 4.64 per cent.
The new set of strict regulations include a ‘stress test’ that ensures a borrower can still pay their monthly mortgage even if interest rates rises and their earning drops.
The implication is that a homebuyer has to be eligible for a more expensive loan, even if they don’t pay more. Analysts believe first-time home buyers are the worst hit of the new government housing rules, as it declines their purchasing power.
Meanwhile, property prices in Toronto continue on steady rise as average value for a detached home hits $1.35M, according to the real estate board.
The Toronto Real Estate Board says the property market in the region recorded 8,547 sales, an increase of 16.5 percent from November 2015.
But the scenario is slightly different in Vancouver as home sales totaled 2,214 in November, a decline 0.9 percent from the record for October.
The new regulations will hurt a good number of buyers may struggle to meet up with the requirements, said James Garbutt of Sutton Group realtors, adding that some intending buyers will simple be frozen out of the property market.