How long does it take Millennials to save to make a down payment on a home?
Millennials – As house prices in Montreal have increased dramatically over the past two decades, it has become much more difficult for young people, or “Millennials,” to buy a home. Just how long that takes was the subject of a recent study, and it seems that Montreal is one of the most affordable cities in Canada to buy a home. As we know, buying a home usually starts with a down payment, minimally five percent of the sale value.
Calculating how long it takes to afford a down payment is a formula that ponders house prices, average salaries, and our propensity to save. The study was prepared by Point2 Homes after doing a cross-Canada poll of 9,000 households.
The report gives an average house value of $481,489 in Montreal, putting a down payment at $24,074. The average household salary, meanwhile is $73,950 and our propensity to save is a mere 4.4 percent, putting our annual savings at only $3,254. This requires more than seven years of saving to be able to afford the down payment of $24,074.
And if you think that houses are expensive in Montreal, prices are sky high in some other parts of Canada. West Vancouver takes the cake; an average house there costs over $2.5 million and just the down payment alone is a whopping $508,260!
Perhaps surprisingly, the average salary in West Vancouver is slightly less than in Montreal and the same calculations give an absurd 160 years of saving before Millennials can afford a down payment there. The nearby City of Vancouver sits at 89 years and some cities in the Greater Toronto Area (GTA) follow with 72 to 69 years.
On the other end of the spectrum, the most affordable cities ranked were Timmins, ON; Trois-Rivières, QC and Cape Breton, NS with only 24 to 30 months of saving needed to afford down payments in these localities.
The average house price is more affordable in Trois-Rivières ($160,948) than in Timmins ($178,421), however Timmins has higher average salaries. Other Quebec cities such as Saguenay, Drummondville, Lévis, and Granby also feature among the 20 most affordable cities in Canada for buying a home.
The report also highlights how many Millennials have unrealistic assumptions about how much it will cost for a down payment and are not saving enough towards a house purchase.
A precise definition of “Millennials” seems difficult to find, but the label is often used to describe the cohort born between about 1990 and 2005.
Point2 Homes describes itself as “an international real estate search portal, a division of Yardi Systems Inc. Our original research, insights and in-depth analysis of the real estate market have been featured in major media publications across Canada and the USA.” More info: www.point2homes.com