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Downpayment for a Toronto Home Might Take 25 Years to Save: New Bank Report

A Toronto family who wants to buy a house in that city would need to save for 25 years to be able to afford a 10 percent down payment, according to a new report on housing affordability.

The Housing Affordability Monitor, issued June 1 by the National Bank of Canada, said that while housing affordability in the country improved for the first time in nearly four years, the improvement was small in comparison to the skyrocketing prices seen during COVID-19.

Mortgage payments, as a percentage of income, are still at 60.9 percent in the first quarter of 2023, even as home prices have declined for a third consecutive quarter, according to the report, which looked at condos, homes, and the real estate market in general across 10 major Canadian cities.

The report calculated how long it would take a median-income household to save pre-tax income to have a minimum down payment for a house or condo. The typical house in Toronto, which the report calls the “representative home,” is listed for sale at $1,163,670.

A household would need to have an income of $236,221 to qualify for a mortgage, and would need roughly 304 months, or approximately 25 years, to save for the down payment. The estimated mortgage payment would come out to a whopping $6,483 a month.

To buy a condo in Toronto, at an average cost of $695,691, a buyer would need to save for almost five years, a bit more than 58 months, to come up with a downpayment of $44,569, taking that chunk out of a qualifying income of $165,220. The mortgage payment on that condo would be $3,876 per month.

In Hamilton, a single-family home is listed on the market at $933,439, requiring a $219,514 annual household income, and 93 months of saving just for the down payment.

It is not just Toronto struggling with housing affordability. Across the country, a prospective home buyer in Victoria, B.C., would need an annual income of $231,194, saving for 336 months, or 28 years, to purchase the representative home at a listing price of $1,138,904.

To contrast housing affordability in other provinces, the report used a number of other cities as representative examples. In Calgary, for instance, buying a house would require an annual household income of $146,251, and require 48 months of savings for the down payment, assuming a representative house price of $612,630.

With an annual household income of $76,200, a prospective home buyer could save for 21 months and buy a $316,104 condo.

Edmonton worked out as even more affordable, with the average priced home sitting at $461,563. A household with an annual income of $111,264 could save for 31 months and buy a house. A prospective condo owner could save for 17 months, out of their $60,919 qualifying income, and purchase the typically-priced condo at $252,713.

All mortgages were calculated by the bank assuming a 25-year amortization period and a 5-year term. Qualifying income was calculated based on a household using 32 percent of pre-tax income to make a mortgage payment at the posted rate, which was adjusted for down payment.

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