B.C. home prices have fallen considerably over the past few months, but ownership is still way out of reach for young people in the province.
Canada Mortgage and Housing Corporation (CMHC) says affordability means not spending more than 30 per cent of pre-tax earnings on housing.
The average price in B.C. is still three times what an average young person can afford, according to a study by Generation Squeeze. The price would need to fall $452,000 for it to be considered affordable for people between 25 and 34 on an 80 per cent mortgage.
Metro Vancouver is far more expensive than other parts of the province. Prices there would need to fall $795,000 or about three-quarters from the current level.
If B.C. home prices have bottomed, wages need to rise dramatically to bridge the gap. Generation Squeeze says full-time earnings for the age group need to triple to $136,200/year. In Metro Vancouver wages need to quadruple to $200,400/year.
The way things are now, it takes a typical young person 19 years to save up for a 20 per cent down payment on an average priced home. If someone started saving back in 1976 it would have taken only five years.
“Despite nominal price declines in some housing markets compared to previous years, the gap between the cost of owning a home and the ability of younger Canadians to afford it is at critical levels. If housing markets are levelling out, they remain untenably high,” said Dr. Paul Kershaw, lead author of the report, and founder of Generation Squeeze.
Kershaw is calling on all parties to commit to expanding Canada’s National Housing Strategy.
“A second phase of the National Housing Strategy must be launched to ensure all Canadians can afford a good home — whether renting or owning — by addressing failures in the broader housing market,” he said.
Generation Squeeze has three additional components to its four-part housing policy framework: Adopt (CMHC)’s goal and timeline to ensure all Canadians can afford a good, secure home by 2030. Ensure housing is a place to call home and prices don’t grow faster than local earnings. And enact policies to tackle supply and demand challenges as well as non-profit housing, while rebalancing the tax treatment of earnings and housing wealth.
“In the lead-up to the fall federal election, we need all parties to commit to bold action that builds on some of the progress we’ve seen emerge in the past couple of years,” said Kershaw.
“Now is not the time to slow down efforts to modernize Canada’s housing market by simply hoping the massive gap between home prices and local earnings will resolve itself.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains