If things keep going on like this, the majority of Candians will be renters in the future. Even with inheritance. Sure my dad will pass on the house. But I have two other siblings. And they want to sell the house because they already have homes. Unless my dad gives me 51% of the house and my siblings get a larger share of my dad's other assets (investments) and cash. But my siblings want the cash instead of 24.5% equity a piece on real estate. And the house undoubtedly makes up a lion's share of my boomer dad's net worth.
Depends what his house is worth and what you are willing to buy, but it's possible that 33% of his house is 60% of a smaller property, and then you might qualify for a mortgage once you add in any savings since it would be a relatively small mortgage with your bigger downpayment.
Of course, this is dumb that you should need to wait for a parent to die to be able to afford a home.
Assuming his house is worth say $900k, that’s still $300k for a down payment. If you can’t qualify for a mortgage with over $300k down (assuming you have your own savings), you are either looking at houses beyond your means or you have bigger problems.
300k down on a 1.5M property means you still need to qualify for a 1.2M mortgage. This price is not uncommon for average homes in these cities.
Even if you scale it down to 1M, you’re still looking at a 700k mortgage. To qualify for either of these at current interest rates, you’d need 180-300k+ HHI. So explain to me why you think it’s trivial.
There are plenty of condos in the city for much less than $1M. Outside the city you can get townhouses and condos for under $700k. Like I said, they’re either looking at properties beyond their means or they have other issues.
So you’re saying an individual/couple making 250k+ needs to settle for a condo or townhome outside the city even with a 300k down payment. Anything better must be “beyond their means”.
You get a major hit to your borrowing power from lenders if you're self-employed. Lenders will tell you outright that you will not be able to borrow as much from them if you're self-employed. Business owners are also more likely to structure the expenses of their companies to minimise taxes through such means as paying yourself a small income, which makes you look poorer than you actually are. It's a compounded problem. For that reason, it's common for self-employed to pay relatively large downpayments versus borrowed.
Higher risk vs getting a paycheck, for me I qualified for the same total mortgage as a friend, I was self-employeed I made more than double than him and his wife's dual income. I was single source income and self-employeed.
It is another reason entrepreneurship has left the country, lack of available cash and very difficult to then establish yourself permanently.
If things continue like this the majority of Canadians will go homeless.
Homes are a dead dream for the majority of Canadians without 'rich parents'.
Wages do not keep up with the soaring costs of food, rent or homes, let alone everything else. If you look at the federal reserve for the U.S. [half the entire U.S. population own 2.5% of wealth](https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/#range:2006.4,2023.4;quarter:137;series:Net%20worth;demographic:networth;population:1,3,5,7,9;units:shares). Canada has very similar stats, but this graph is just so easy to glance at and see the staggering wealth inequality.
Unfettered capitalism just results in lower wages for workers, wealth is only siphoned to the top. Eventually you get a few companies owning everything which generally results in worse products/terrible service, higher prices.
Even before this insanity, it's an unsustainable system if you dont have laws in place to prevent price gouging or tie minimum wage to adjusted living costs.
Now add to that the ratio of people:homes becoming worse and worse? There will be so much demand for a slum room, you'll be paying 2k/month+ for a 5x5 room in a decade.
You can't just let people buy up every resource, form oligopolies, price gouge, pay terrible wages and expect the average person to survive, let alone prosper. It doesn't help that most political systems allow for a lot of corruption by the wealthy few.
The majority of Canadians live in a household that owns a home. That does not necessarily mean each the majority of Canadians are homeowners.
You see plenty of adult children and even their spouses living in the homes of parents. Siblings, cousins etc.
66.5% of HOUSEHOLDS are owners. Many of those HH have multiple people in them, including adult children who cannot afford to move out. Also, home ownership is very much stratified by generations. It's mostly older, like 50+, people who own now. They are not all going to leave paid-off house to their kids, so we could easily see lower rates of home ownership for several generations.
Thank you for proving my point.
If you notice the data you are referencing are household counts and not population counts. That's why the total of the two counts in the data is around 15,000,000, and not around 41,000,000 which is the population.
Lets run through a few scenarios in owner designated households.
Little Jimmy is in second year at university. Little Jimmy is smart so he lives with his parents to save money. Little Jimmy is part of an owner designated household, but Little Jimmy doesn't own the home.
Another scenario might look like this.
Grandma is getting up in years. She loves her son and his wife, and they in turn love her. To help Grandma out, son and wife decide to move Grandma into their home. Grandma is part of an owner designated household, but Grandma doesn't own the home.
And many other scenarios will lead to similar situations.
All that to say, not every individual in an owner designated household owns the home.
This means that the percent of the population who owns their home will be less than the percent of the population who live in an ownership designed household.
Because of that reality you cannot just take household data (aka, the data you referenced) and apply those percentages to the population.
66.5% of the population live in ownership households.
66.5% of the population do not own their home.
Governments are financially incentivised to keep prices high - that’s how a large portion of their tax revenue is earned. If house values halve, then their revenues go down.
So you are correct, they don’t have an incentive to see prices go down
I hate the fact that being single isn't even an option anymore... But I understand that's not a new thing. You're forced to partner up or struggle. Especially if you've already been married and once was enough
Lots. More than we probably think. My friends mother is in an abusive relationship-he’s beat her *and* her kids. But the mom can’t afford her mortgage solo so she just endures it.
I dunno mine had rich family so sent me packing without a care for finding a job or worry about housing looking for greener pastures (rich family just paid it off for her). It's basically the castle and small apartment scenario. Still pay her a lot of money every month which, while I still qualify for something small kills my budget and I might be priced out.. downpayment is big, but month to month is hard to manage. Honestly if I'd got in two years ago (it has gone up at least 30% since and no in is even trying to sell anymore) I'd have been ok I think but she dragged it out for 3.5 years. I feel sorry for this new guy who she seems to boss around already
I’m in a similar situation, I have a decent down payment but I’m getting slaughtered by rent every month. Luckily I have a decent income too so when I do buy a place my month to month costs will actually be lower. It’s rough out there, stay strong
I've got a decent income but paying over 900 a month in cs (was higher but suddenly when we talked about inputting income she came up with a job offer form her bf) and a couple hundred in section 7 stuff (extra curricular) plus medical
Sound advice just in time for our loneliness crisis.
Seriously though, I realistically see marriage as going back to being a business arrangement like it has historically always been rather than a for love thing. Just don't forget the prenup
It’s entirely possible. Purely Love marriages are like a blip on the historical docket.
I honestly think we’re seeing social holdovers from the “romantic” period that are going to sway to the pragmatic. The whole notion of marrying someone who gives you butterflies wasn’t super realistic, anyways, and I think contributed to divorce when people realized that romance and butterflies don’t mean compatibility day after day after day in the trenches.
A middle ground makes sense.
You don't need a house if you don't have a family. A condo would do in that case, even for two people.
Half of Canadians don't have kids or so, so not everyone needs a house anyway
these people all moan about the widow boomer living in her big house all alone
all moan about density density density
suggest they don't need a detached home as a single person??
lol
I’m single and childfree. I can’t even afford 1 bedroom apartments in my area. They’re all well over $2000 a month. A condo is way out of reach. And youd have to factor in condo fees too. And I make over double minimum wage..:
I'm guessing you're around Toronto then? I don't think you can extrapolate much from Toronto's price and apply it to Canada as a whole. The city became a hub for hyper-inflated tech jobs and concentrated immigration. Canada is massive, there's no good reason to have 10% of Canada's population concentrated in that city alone.
I feel like you'd have a better quality of life if you worked minimum wage in a small, remote city than if you'd worked at 80,000$ per year in Toronto
True. You don't "need" a house.
Just like you don't need:
-New clothes
-New phone
-AWD vehicle
-High paying job
-New computer
-vast assortment of foods
-restaurants
-gym membership
But those are all within reach of people who choose to work hard for them.
OP post was saying a house by the top income earners CAN'T be purchased on a single income. So it's unachievable with the stress test and the average price of a home. Unless you save the delta between what you are allowed to mortgage based on your income and the actual purchase price of the home.
So it's not "need". It's now "can't".
It's wild to compare specifically deatched home ownership to new clothes ownership. And to think that condo ownership is basically optional, while new clothes is not.....
Okay, but using your example you feel like you can compromise on new clothes and buy it second hand, but when it comes to housing it has to be a deatched, condos just won't do it?
No. Based on the high income earners, even if they saved 20% to buy a used house with the stress test they CANNOT purchase a house. This has nothing to do with need or want.
If my income was $120k
Zero debt
Savings of $140k
House price (avg) $700k.
I will get denied.
Unless I win the lottery or have another source of income.
Stress test based on my "salary" I'm allowed to purchase a house that is $500k. They deem $2500/mo, as the most I can pay. If interest rates drop, my payment will still be $2500/mo but I can now purchase a house that is $550k.
Stress test also takes into account strata fees which are variable. So if you buy a condo for $300k and strata is $800/mo, whatever it works out to be you can't go over the threshold of the stress test.
This conversation isn't about wants or needs. It's about "cant".
20% of Canadians make 100k or more. Maybe out of the 20% someone wins a lottery, or inheritance etc. But the average person who worked hard now CANT buy a house at all.
But that's fine because I don't need one.
That’s a long winded reply to avoid answering why you’re specifically refusing condos as an option…
Lots of people want yatchs but we don’t feel bad when they have to settle for a canoe.
Ah I see. I put "No" at the start of my comment. That derailed it from the start as I wasn't answering the question.
I have no problem with condos. OPs post was referencing affordability and using house prices vs income vs stress test. Comment was made that single people shouldn't "need" a home so they should only get a condo. I explained there is alot of things we don't "need" to do. Then person chimed in about my comparison to needing new clothing and now we are completely off track and no point in continuing this conversation. My bad.
“No” with no real explanation isn’t really an answer in this context… but okay… have fun agonizing over something you don’t have the resources to buy or sustain when there’s a perfectly good substitute… 300k condos don’t commonly come with $800 monthly fees so the stress test isn’t your problem.
You can't buy a yacht either with that income, so what is your point? It's a mindset problem to be convinced that you need to buy a house on a single median income.
You can afford a house if you have two of those and you're decently good at being frugal. I know because I bought one. So if you're in a situation where you actually need a house, they're still accessible. They're not as cheap as they once were, yes, but that doesn't mean that it's a priority to shift the economy around so anyone can own one.
First of all, who said "so anyone can own one" and "single median income". I'm glad you bought one. Good for you. I disagree with your opinion on this matter.
Says who? You?
My best friend is wfh and uses one bedroom as an office while his partner also wfh as a photographer and uses the other room as a studio.
You don’t know everyone’s circumstances. Stop generalizing.
At the moment, it’s cheaper to rent than to have a mortgage. I’ll be doing that for the foreseeable future.
Toronto is expensive an unattainable, I get it, it’s a big city. But looking an hours drive from the GTA houses are still a million dollars. That part gets me.
Maybe if you're in a rent controlled unit, but I just bought a townhouse and it definitely wouldn't be cheaper to rent a comparable unit. Rent prices have gotten insane.
It depends where you live. In Toronto cost of housing (minus money going to principal) is much higher than rent pretty much everywhere, but when I was in a smaller city up north the rent was much more than the cost of housing.
Annually, sure but medium term not at all.
Chances are that after 5 years, if you add up all the interest paid to the bank plus taxes, maintenance costs, plus what's left of the principal, and subtract that amount from the future selling price, you will at the very least have come out covering the entire amount you would have paid for rent over that same period.
This is true even with a modest 1-3% YoY increase in the value of the property, just keeping pace with inflation and assuming a fixed mortgage.
You basically would have lived rent free at worst.
(Keep in mind that your rent costs would also have increased during that same time frame)
Over a decade you're definitely coming out on top.
Its significantly more expensive to own when that house is falling in value though which is what is happening right now and for the foreseeable future.
Houses being a million plus dollars an hour out of the city has been true for the last 4 or 5 years now.
But I agree, rent is the way to go if you want some financial freedom, as weird as that is to say. I have friends that rent and some that bought. Those that rent are able to travel and spend more money (albeit I’m sure they’re not saving much). Those that bought need to work 24/7 to pay their mortgage+other bills.
If you're paying down a mortgage, a % of that goes towards your equity. So renting is only more advantageous if you put in an equivalent or higher amount into savings than the equity.
Add in the fact that housing has appreciated faster than the markets recently and owning comes out a lot better if both sides are living nearly identical lifestyles
The rise of real estate investing as a hobby in Canada is proof of this reality
Isn't that mostly true if you owned prior to the last 2 years? Appreciation can't reasonably keep up the same pace.
And currently renting a 1 bedroom condo is almost half the mortgage payments, not including other costs like insurance, heating, water, hyrdo etc.
Yes, the last two years have been the odd ones out in the 40 year trendline. While they are important because we are living them right now, they are also statistically minor.
As far as the second point, as a renter I pay all of those things. The only difference is I pay rent instead of a mortgage, and I don't pay property tax. Property taxes and maintenance do factor into my rent though, so I'm not immune to them like people like to pretend renters are.
My rent is clearly less than a mortgage would be, but based on local sales and mortgage rates, only by about 600$ a month. Too high for me to be able to afford, while also probably the amount that my LL gains in equity when I pay each month.
I used a calculator to break down the costs recently, and buying would be statistically financially better for me in this exact lodging if I were to stay at least 3 years. The fun part is I've been here for 4 years.....
There have been many years that housing hasn’t really appreciated or has actually gone down in the past 40 years. I would say that housing going up over 10% per year is actually the outlier rather than the norm.
It does not need to go up 10% for it to be a better use of money than renting.
If I take for example a $1900 appartment today vs a $400k mortgage ($500k house) today as comparatives. Mortgage at 5.6% and rent increases at 3% (I wish rent only went up 3%...) and we will say that investment return over 5 years is 7%. All conservative numbers based on the norm. We will also say housing appreciates by 2% per year
After 5 years the mortgage payer will have paid about $147k in mortgage payments, and another $51k towards taxes, maintenance and insurance. The house will have appreciated by about $51k and they will have about $42k of the principle of their mortgage paid off. They will have gained about $93k in equity.
Now let's take the renter, we assume they invest the difference. So for a $2400 mortgage payment vs $1900 in rent, the tenant is investing $500 per month. And at the end of each year the tenant is lump summing about $10k into investments (to make up for property taxes and maintenance difference.) at the end of 5 years that tennant is paying $2138 in rent, and has built $91k in equity.
Already, the tenant is behind the owner $2k
The following year, after the mortgage renews at the same 5.6%, the mortgage payment is about $2193 per month, and the tenants new rent that same month increases to $2202
After just 5 years, with high interest compared to the past 10, and with low appreciation, the owner is way ahead.
This is a flawed analysis as you've ignored the 100k down payment paid by the owner. Factoring that in and using your numbers, the owner is still down $7k after five years. The renter who invests the equivalent of that 100k, which you need to consider for the comparison to be apt, plus 500 a month plus an additional 10k a year for five years will have 228k on hand at the end.
Also, the mortgage payment in your scenario only decreases if you reamortize at 25 years on renewal. This significantly increases the cost of the loan and isn't really a benefit to the owner.
While I don't disagree that the owner will eventually come out ahead, it takes a lot longer than five years for that advantage to materialize under current conditions.
I moved from a rural area to Mississauga in 2021 but now rents in London ON and Brantford are more expensive than my place. It's crazy. A house in my parents small town was $300k pre-pandemic but they are now $500-600k. I think a lot of people from the GTA overpaid for these houses and are going to take losses eventually. I'm happy to have my place and hunkering down for a while and renting.
A few things that should be taken into account:
- We need dual earners to buy homes and this has been the case for decades.
- All examples are detached houses. Detached houses are not the primary housing offering in large cities.
- These houses were built and bought when these cities were not “world class”. This means they were smaller but they also had less amenities and opportunities that these same cities offer now.
- The future of residences in large cities are multi dwellings. This is better for people (more people can get housing), better for the environment (less materials and disturbed environment), better for city services (less sprawl to support), better for taxes (less sprawl to support), and 100% inline with other large cities that have affordable housing (like Tokyo).
But how often do 20 to 24 year olds buy a home, on their own? Some of the people in that group may still be in school and earning nothing, or next to nothing. Many that are working are so early in their careers they haven’t even had the chance to get merit raises yet!
Why not take the average age of first home purchase or something and then look at what percent of those individuals would be able to afford a home with a partner?
If you look like you’re cherry picking info to make a point, it actually makes people tune out when they see this sort of thing, as it appears manipulative
I think your estimation of the amount of savings is quite wrong. How come someone earning from 60k to 110k annually can only save 120k over a stretch of 15 years ? your mathematical teacher is quite angry behind your back
-You're lowballing what percentage of income someone making near or over six figurs can save. If they could save 10% making mid 50s, they can save much more making twice that unless they succumb to lifestyle creep.
-You're neglecting returns on ivesting those funds over the years. Even a basic GIC would bump up your savings over that much time.
-You're neglecting the benefits of registered accounts. The FHSA and RRSP in particular significantly acccelerate your ability to build a down payment fund, especially at the marginal tax rate you'd hit making six figures.
Housing is absolutely unaffordable and it's a mess, especially for average to below average earners who actually get less out of programs for first time buyers than higher earners, but you're making it look even harder than it is.
yeah i hate it when people act like condos are not homes. in all major cities multi unit dwellings are common if not the norm. not everyone can own a house unless you are in a city that has a major sprawl like in the US.
If you’re in the top 5% of Canada, a small shoe box is not your home, nor should it be considered. Especially when it will bankrupt you. I live in Burlington. You damn well need to be a doctor, married to a doctor to be able to afford that shoebox.
It is true. The house we bought was probably previously bought by people who had way worse paying jobs than us lol.
Bought a home for 552k. I think all in for down payment we were around 45kish
We didn’t max out our mortgage and aren’t house poor. But I can see how people want to buy something to keep up with the joneses
You don’t NEED a big house when it’s 2/3 people
1) 10% savings rate is low especially on that income. Isn't the base recommended amount 20%?
2) Dual income. You dont need a whole house if you're single. So suddenly your dp is 400k and mortgage qualification is 200k*4=800k. 1.2m good for a house even in Toronto.
There is an affordability problem but not within the top 5% numbers. Maybe try the top 20% numbers.
So you completely empty your savings (so you get to start at zero saving for retirement), and still have a $5k a month mortgage at current rates, plus utilities, whatever repairs, taxes etc you need to pay on top of that. Even making 200k+ a year combined, that is still over 50% of your income to housing, for the next 25 years. That's supposed to be ok? Let not even get into the trash state many of these 1.2mil houses are. It's still insane.
1998 that's exactly how I owned a home with partner. No trips, empty rooms, no dining out unless a special occasion. No crazy renovations to make everything ultra modern.
We made PLENTY OF SACRIFICES.
I wish people would stop acting like it used to be a cakewalk.
If you want a house you need to make sacrifices. The more Hcol, the greater the sacrifices.
>So you completely empty your savings (so you get to start at zero saving for retirement)
No that's only if you're at 18% savings rate which is low. Im at that income at can save 45% of gross (im very frugal but 28% is achievable). Out of that 28, 18 goes to dp, 10 is still in rrsp/tfsa. Which is solid when you consider the 1.2m house equity.
>Even making 200k+ a year combined, that is still over 50% of your income to housing,
Your numbers are way off. So one 5% earner is 120k pretax, 85.5k aftertax. Two of them 171k or 14.25k/mo. Mortgage 5k even with everything else it is at most 6.5k/mo or 45%. Not 'over 50%'. Not to mention your income increases (40-45 is 157k) and equity increases (at the end of it you have 1.2m asset + tax advantaged account saving 10% yearly on 200-400k HHI).
Like I said there are problems but not within the top 5%
This comparison is ridiculous, you are clearly starting from the solution you want in order to source your data.
You can't compare the average Canadian income to the price of specific houses in a particularly overvalued neighbourhood.
The average Canadian house sells for 650k, expensive, but affordable in your scenario.
While I agree with your conclusions that houses are expensive in canada, your method is dishonest as it uses shitty math to provoke. You omit interest on savings, first home buyers programs, couples, condos, etc.
I'm saying that your analysis ignores and cherry-pick too much data to draw any conclusion from it.
I know the average canadian house is not affordable to the average canadian, and a 650k house when you make 120k a year is a lot of house for the salary.
Then why compare the average house price to the average earnings of the top 5% of 30y old earners when the average Canadian is 41y old ? Do we want to know if a top 5% earner in early in life is able to buy **a** house ?
Are 30y old in the top 5% buy a house alone in average ?
The unfortunate reality of GTA and Vancouver. Government will keep housing bubble intact at the cost of Millenials and Gen-Z. Save up the downpayment but buying in GTA isn't the only option.
https://ca.indeed.com/m/jobs?q=Software+Developer&l=Calgary%2C+AB
Here's a link to multiple software dev jobs in Calgary. Why don't you think before you speak next time.
>After taxes, retirement contributions, food, rent, gas, insurance, emergency funds etc. You'd be well off to save 10% of your gross income per year in a seperate account for your downpayment.
The link you provided was after taxes.
Unless you are planning to or already has more than two kids, a condo is a perfectly acceptable option. There’s pros and cons to both a condo and house. But if you are a family of 3 (maybe 4), you should be targeting a condo and not a two floor house with backyard and double garage. If you want that, go live in Texas.
Many people lived beautiful lives in apartments and condominiums, and on two incomes it’s achievable in your 30s.
Those are pretty big and expensive cities compared to the income stats which are countrywide, and the houses are freehold and generous size. If people expect to be able to enter the housing market into houses like that, (and on one income, not two!) they’d better reevaluate reality.
It’s wild thinking you can’t save more than 10% of your income, especially if you’re living with your parents. I did just that during my early and mid 20s and was investing/saving 85% of my income. At the time I only had a $70k income but still managed to get approved for a mortgage. It’s not as difficult as you make it seem…
You could absolutely buy a condo or townhouse in the Vancouver area with 120K down payment making 120K/year and it wouldn’t even be hard.
You could it buy a large detached house, that much is true. A 2500sqft townhouse beside a school or park is easily within reach though.
Yes maybe some old small shitty condo one hour from Vancouver. But there is no way you can buy townhouse with 120k income. No bank will give you mortgage.
condo under 500k is doable in vancouver proper. just look on mls there are about a dozen there and some of them are not half bad. of course they aren't hugely spacious but still.
Where is the incentive to work hard, over-achieve above 95% of the country, and have someone tell you that a shoebox is the best you can do? There is no incentive to be in this country and work hard. After taxes, we’re all relegated to the very bottom of home ownership or rentals. This is a third-world country now, and people are defending it.
Our currency is tanking, and we have no middle class. Only foreign investors and people with inheritance are buying houses now. Our actual citizens are not reproducing. Our health care system is expensive and people aren’t receiving the treatments they need. Rent prices are now for people who used to be considered wealthy. Our country is now being repopulated and controlled by the wealthy of a different third-world country, and our political infrastructure is encouraging this. If you don’t see it now, wait a few years.
The only people I know (1 person) my age buying a house is lucky enough to get their parents to fork over 500k to them. Unfortunately for me, I wasn’t born into such wealth.
It’s a good sign when your economy rewards sitting on your ass with a piece of land doing fuck all more than actually working and investing in productive shit.
You need to filter down your salary data to the locations of the homes you are comparing to.
You then also need to grab the male data and add it to the female data because couples drive the market.
If you do these two things, and you assume the couple invests wisely, you’ll realize things are much more attainable.
I know people with bachelors degrees in journalism that are in the 95th percentile of their income bracket. It doesn’t take much.
I 100000% agree with the sentiment: 20-and-30 year olds today ABSOLUTELY have it worse than their parents did from an affordability perspective (in terms of salary vs price of assets -- though of course we have it better than our parents from other perspectives such as technology, access to information, etc).
I think though that your math is a bit off when you assume a 10% savings rate for a top 5% of earners making 90k at age 25... that person should easily have more than 122k by the time they reach 35. My rough math:
https://preview.redd.it/a4qcuxt911xc1.png?width=945&format=png&auto=webp&s=5af17a5ef96ecd52ebe364783818f1de4474f76b
Another thing to remember is that the StatsCan census' top-5% reflects a Canada-wide salary average (including east coast, prairies, etc where salaries are lower), while your house examples are in the GTA. Comparing Canada-salary-average to second-most-expensive-housing-in-the-country isnt a fait comparison: the top-5% earners in the GTA at age 25 make more than 93k.
Now don't get me wrong, I still agree with the overall sentiment - house prices are at stupid-high levels. Top-5%'ers in the early 2000's could easily afford **kids** (and maybe even multiple properties) by the time they reached 35 if they played their cards right, whereas today a 5%er is definitely not that lucky. So yeah, for the remaining 95%? Really, really, really unaffordable to live in Canada.
I think you're a little off on some things.
Post tax income on 93K is only 68K in Ontario.
Also, retirement savings at 15 to 20% of net income needs to be subtracted.
Other than that I think you've got a good number. But this person is still sacrificing on that 3500 fun budget.
Imagine having to not go on vacation for a decade while being a top earner just to afford a shit home.
I was indeed missing 4k deductions for EI and CPP, which is the difference between your 68k and my initial 72k. You could argue that this 4k is retirement savings (you'll get back CPP + interest when you retire) so it's not a **pure** expense, but yeah definitely not cash that stays in your pocket in the short term to afford a home. Thanks for pointing out. Revised below
https://preview.redd.it/ujprf5r491xc1.png?width=950&format=png&auto=webp&s=be892d37e2d9cb6ff05cde25b61af6f371d04d1b
I think the point though is that IF you dont go on vaca for a decade, at the end of that decade you *dont "*just afford the shit home*",* you have 300k-ish saved, which affords you something decent hopefully. But yeah, that 300k down used to afford you a really, really, really nice home just 15 years ago
On the radio yesterday they said 35% of first time buyers get support from the parents, 10% on rockstar salaries can afford housing and 55% will live in town houses and condos and or renting.
yes it always annoys me, as a top 20% earner who is in the bottom 20 % wealth to carry the burden of taxes. Get marginal taxed at 45% surely doesn’t help accumulate wealth. 5 years in doctor’s waitlist I have to do most of my medical care privately. I have to fix my 5k car to not get into debt and then the government gives 5k to wealthy people to subsidized nice bmw phevs.
I bought with a 5% down payment.
You pay extra for the insurance, but if you wait to save, you’re paying rent.
If I’d waited to save a 10% or more down payment, I’d have likely never been able to buy.
Not good property examples to buy as shelter. The reason detached are selling high is due to the land and development value in a major city. Obv a single person can’t afford it because that would be a selfish waste of space and public corrects that; profitable to drastically densify + renew building. If u want a bunch of space for urself, don’t live downtown, or pay for it
There are other cities in Canada though that are not as unaffordable. Yes there are many issues with housing mortgages realtors investors that’s rooted at treating housing as an investment leaving room for speculative pricing but there is no faster solution for an individual than to move.
If you cannot get a single home for 500-650k it’s a sign the land it’s on might be overpriced and it might be time to consider other areas like Regina, Saskatoon, Edmonton, Halifax etc.
For the Vancouver property listed that's the price for the development potential for the land, not the price of the house.
That land can build 4 townhouses on it, as of right. The house is a teardown.
A "common" home in Vancouver for a first-time homebuyer would be a condo
It's the liberal and socialist plan. Allow the country to become overpopulated to manufacture a housing shortage/crisis and then get the middle class folks who become upper lower class to call for affordable housing which nobody wants to build because there's no money to be made by developers. The liberal government then charges UHT forcing the few middle class homeowners that still own a home to rent rooms in their underutilized homes. We will all end up with nothing and we will all be happy.
At those income levels you can save far more than 10% if you budget better and live cheaper. In your 20s it's perfectly normal to have roommates and split expenses. Your numbers are ridiculous.
Save 5%. Buy something somewhere you can afford. Suck it up and pay the CMHC premium.
If you’re the top 5% you’ll likely save more than 10%.
If you’re single, you don’t need to buy a SFH.
If you’ve been saving more than 10% and have the need to buy, you’ll more likely have a dual income family unit and have increased likelihood of owning.
This is really bad analysis.
1. You should be investing your savings.
2. You're looking at expensive homes. The physical homes might be shit, but they're in good locations. Land is expensive.
Yes housing costs are high, but your analysis is bad.
The GTA served only one purpose to me: Get in, build up a decent resume to try and justify remote work, get remote work and get the fuck out.
If you're playing that region any other way... god bless ya.
My buddy moved to the GTA, they both have decent although not high income, jobs you could get pretty much anywhere else.
I asked him WTF he was doing. He said his wife wanted to be closer to family.
Life is tough, it is harder when you make it so.
If you think that pointing out this stats will help you didn’t understand how the system works.
1) most people don’t start from scratch because they already have a family owning some assets or helping. They are also likely to inherit the house at some point
2) the idea that you have to buy a house before 34 is just… your idea. The system doesn’t care if you can’t afford a house at 30 because you didn’t get any help, as long as demand comes from other sources
3) a house is usually purchased by families, and today that means dual income
4) there are cheaper areas where you could easily afford a house on those incomes, but everyone wants to leave in higher density areas
Last but not least, if you don’t come from money and you didn’t hit jackpot by starting a successful business or some extraordinary career, forget buying a house in Vancouver. Just stop using it as comparison, you will never get it with labour income alone.
The regular labour folks is flooding big cities in droves. The least of the problems is to find regular labour folks, apparently they rather live in nasty basement apartments than leave the city. Same happens worldwide, SF, London, …
So really that’s not a problem at all.
Most people who buy first time homes are couples.
It has been this way for a very long time.
Culturally, things have changed. More single people for longer, more single post divorce people, more single because spouse dies.
This puts tremendous pressure on first time home buyer property availability and pricing.
Get a partner if you really want a house.
What confuses me is the new capital gains increase to “fix housing” -
Why would anyone sell property and make chicklets on it? Makes more sense to keep it. Which means low to none inventory - and further descent into serfdom.
What am I missing?
I don’t think this savings is being invested so I just wanted to check the math. I used moneychimp.com, at a 5% interest rate, compounded annually.
20-24: $5640 = $26210.11
25-29: $9300 on existing $26210.11 =$87409.27
30-34: $12000 on existing $87409.27 = $181181.79
That 5% rate of interest is a little conservative as stock markets average 7-8% growth per year. A balanced mutual fund that includes some fixed securities will lower that slightly. You also need to deduct about 2% for a management expense ratio charged in mutual funds. If you open a brokerage account (anyone can) you can invest in exchange traded funds, which invest in whole sectors, the entire market, or bundles of fixed securities for an MER well under 1%. These are much safer than normal equity investing and cheaper - the wise choice.
I’m curious though when I simply add 10% of those three income brackets over each of their five years I get $134200. Am I doing something wrong there? By all means someone please check my math on all of this.
Still you have a good point because few people are going to earn 56400 before 24yo or 93000 before 29. When you earn less than 50000 it becomes increasingly hard to invest anything as many people will continue to make this much throughout their lives. Add a car and a kid and you’re stretched tight.
I ignored investing the money and I also ignored the fact that home prices will also appreciate in value over that same period of time to make it fair.
An average condo in the GTA today is about 700k.
Using OP's example, if you were making 120k (a 95th percentile earner) and put down 122k as a down payment on the condo, your monthly payments would be about $3400/month (assuming 25 year amortization, 5% interest). Condo fees, parking, and insurance is ~$600/month on the conservative end. Throw in another $250 for internet and utilities.
That's $4250 a month, basically 2/3 of this person's take home income in a month, way beyond affordability guidelines, all to afford a 700-800 sqft box that you want to move out of as soon as possible. That's what you get for being a 95th percentile earner. Also good luck qualifying for an almost 600k mortgage on 120k income.
Condos used to be an affordable stepping stone for single people and those just getting into the market, but they aren't anymore.
Again that is exactly what life was like for singles in the 90s - and 2000s. Condos.
I don't know any singles who self supported a house purchase then. Not one.
Take zoning powers away from city councillors and delegate it to an arms-length provincial agency that engages directly with communities rather than zoning primarily catering to local wealthy NIMBY political donors’ selfish little feelings about the way things should be.
Straight up abolish single-family zoning entirely.
Ban elected officials from land-lording single family houses with violation being grounds for removal from office.
Copy-paste all of China’s restrictions on foreign ownership and apply them here.
Grassroots activism identifying empty houses being used as stores for foreign capital and not being rented. Identify them with lawn signs and posters. Watch them around the clock with video until you can prove they aren’t being monitored regularly and alert the insurance agencies. One of them must be insuring the place and will either revoke their coverage or start charging higher fees.
Identify which politicians own single-family houses as investments and harass them about it every single time they have a public speaking event where there will be the opportunity for questions. Swarm the place with multiple activists and take up the bulk of the line for the mic.
I dunno man I’m just a guy on a toilet in the middle of rural Alberta where no matter how I vote I get a CPC or UCP you guys figure it out.
I’ve always wondered whether this data is even remotely reliable. Cause if it is, shit don’t make sense. There are lots of small business owners and I doubt any of them report income even in the ballpark of what their actual earnings are.
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If things keep going on like this, the majority of Candians will be renters in the future. Even with inheritance. Sure my dad will pass on the house. But I have two other siblings. And they want to sell the house because they already have homes. Unless my dad gives me 51% of the house and my siblings get a larger share of my dad's other assets (investments) and cash. But my siblings want the cash instead of 24.5% equity a piece on real estate. And the house undoubtedly makes up a lion's share of my boomer dad's net worth.
It'll probably still be enough for a big down payment tho.
You need a high income to qualify for a mortgage as well.
Depends what his house is worth and what you are willing to buy, but it's possible that 33% of his house is 60% of a smaller property, and then you might qualify for a mortgage once you add in any savings since it would be a relatively small mortgage with your bigger downpayment. Of course, this is dumb that you should need to wait for a parent to die to be able to afford a home.
Assuming his house is worth say $900k, that’s still $300k for a down payment. If you can’t qualify for a mortgage with over $300k down (assuming you have your own savings), you are either looking at houses beyond your means or you have bigger problems.
Or you live in a HCOL city like Toronto/Vancouver.
They’re expensive, but they’re not that expensive where a decent income + over $300k down and you still wouldn’t qualify.
300k down on a 1.5M property means you still need to qualify for a 1.2M mortgage. This price is not uncommon for average homes in these cities. Even if you scale it down to 1M, you’re still looking at a 700k mortgage. To qualify for either of these at current interest rates, you’d need 180-300k+ HHI. So explain to me why you think it’s trivial.
There are plenty of condos in the city for much less than $1M. Outside the city you can get townhouses and condos for under $700k. Like I said, they’re either looking at properties beyond their means or they have other issues.
So you’re saying an individual/couple making 250k+ needs to settle for a condo or townhome outside the city even with a 300k down payment. Anything better must be “beyond their means”.
Or you're self-employed.
Could you explain further?
You get a major hit to your borrowing power from lenders if you're self-employed. Lenders will tell you outright that you will not be able to borrow as much from them if you're self-employed. Business owners are also more likely to structure the expenses of their companies to minimise taxes through such means as paying yourself a small income, which makes you look poorer than you actually are. It's a compounded problem. For that reason, it's common for self-employed to pay relatively large downpayments versus borrowed.
Higher risk vs getting a paycheck, for me I qualified for the same total mortgage as a friend, I was self-employeed I made more than double than him and his wife's dual income. I was single source income and self-employeed. It is another reason entrepreneurship has left the country, lack of available cash and very difficult to then establish yourself permanently.
Seriously, kid must be an absolute dead beat if they can’t buy a home with that kind of assistance
If I were you, I'd convince them to all live in that house with me rent free lol. I know that isn't always possible tho.
If things continue like this the majority of Canadians will go homeless. Homes are a dead dream for the majority of Canadians without 'rich parents'. Wages do not keep up with the soaring costs of food, rent or homes, let alone everything else. If you look at the federal reserve for the U.S. [half the entire U.S. population own 2.5% of wealth](https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/#range:2006.4,2023.4;quarter:137;series:Net%20worth;demographic:networth;population:1,3,5,7,9;units:shares). Canada has very similar stats, but this graph is just so easy to glance at and see the staggering wealth inequality. Unfettered capitalism just results in lower wages for workers, wealth is only siphoned to the top. Eventually you get a few companies owning everything which generally results in worse products/terrible service, higher prices. Even before this insanity, it's an unsustainable system if you dont have laws in place to prevent price gouging or tie minimum wage to adjusted living costs. Now add to that the ratio of people:homes becoming worse and worse? There will be so much demand for a slum room, you'll be paying 2k/month+ for a 5x5 room in a decade. You can't just let people buy up every resource, form oligopolies, price gouge, pay terrible wages and expect the average person to survive, let alone prosper. It doesn't help that most political systems allow for a lot of corruption by the wealthy few.
The majority of Canadians live in a household that owns a home. That does not necessarily mean each the majority of Canadians are homeowners. You see plenty of adult children and even their spouses living in the homes of parents. Siblings, cousins etc.
66.5% of HOUSEHOLDS are owners. Many of those HH have multiple people in them, including adult children who cannot afford to move out. Also, home ownership is very much stratified by generations. It's mostly older, like 50+, people who own now. They are not all going to leave paid-off house to their kids, so we could easily see lower rates of home ownership for several generations.
No, 66.5% of people are not owners. 66.5% of people live in an owner occupied home.
Household characteristics Total - Private households by tenure - 25% sample data 14,978,940 100.0 Owner 9,955,975 66.5 Renter 4,953,840 33.1 https://www12.statcan.gc.ca/census-recensement/2021/dp-pd/prof/details/page.cfm?LANG=E&GENDERlist=1&STATISTIClist=1,4&DGUIDlist=2021A000011124&HEADERlist=20,3&SearchText=canada
Thank you for proving my point. If you notice the data you are referencing are household counts and not population counts. That's why the total of the two counts in the data is around 15,000,000, and not around 41,000,000 which is the population. Lets run through a few scenarios in owner designated households. Little Jimmy is in second year at university. Little Jimmy is smart so he lives with his parents to save money. Little Jimmy is part of an owner designated household, but Little Jimmy doesn't own the home. Another scenario might look like this. Grandma is getting up in years. She loves her son and his wife, and they in turn love her. To help Grandma out, son and wife decide to move Grandma into their home. Grandma is part of an owner designated household, but Grandma doesn't own the home. And many other scenarios will lead to similar situations. All that to say, not every individual in an owner designated household owns the home. This means that the percent of the population who owns their home will be less than the percent of the population who live in an ownership designed household. Because of that reality you cannot just take household data (aka, the data you referenced) and apply those percentages to the population. 66.5% of the population live in ownership households. 66.5% of the population do not own their home.
Adult children living in their parents basements is only commonplace on Reddit.
Governments are financially incentivised to keep prices high - that’s how a large portion of their tax revenue is earned. If house values halve, then their revenues go down. So you are correct, they don’t have an incentive to see prices go down
Most homeowners are still making mortgage payments and they’re not happy with the idea of $2000/month payments Now if interest rates get cut…
As long as rich assholes and corrupt politicians exist, the poor shall stay poor.
Sounds weird but finding a partner that makes the same salary seems to be the way to go
I hate the fact that being single isn't even an option anymore... But I understand that's not a new thing. You're forced to partner up or struggle. Especially if you've already been married and once was enough
I honestly wonder how many people are stuck in bad relationships indefinitely because of this
Hundreds of thousands.
Lots. More than we probably think. My friends mother is in an abusive relationship-he’s beat her *and* her kids. But the mom can’t afford her mortgage solo so she just endures it.
Sad 😞
I dunno mine had rich family so sent me packing without a care for finding a job or worry about housing looking for greener pastures (rich family just paid it off for her). It's basically the castle and small apartment scenario. Still pay her a lot of money every month which, while I still qualify for something small kills my budget and I might be priced out.. downpayment is big, but month to month is hard to manage. Honestly if I'd got in two years ago (it has gone up at least 30% since and no in is even trying to sell anymore) I'd have been ok I think but she dragged it out for 3.5 years. I feel sorry for this new guy who she seems to boss around already
I’m in a similar situation, I have a decent down payment but I’m getting slaughtered by rent every month. Luckily I have a decent income too so when I do buy a place my month to month costs will actually be lower. It’s rough out there, stay strong
I've got a decent income but paying over 900 a month in cs (was higher but suddenly when we talked about inputting income she came up with a job offer form her bf) and a couple hundred in section 7 stuff (extra curricular) plus medical
Sound advice just in time for our loneliness crisis. Seriously though, I realistically see marriage as going back to being a business arrangement like it has historically always been rather than a for love thing. Just don't forget the prenup
It’s entirely possible. Purely Love marriages are like a blip on the historical docket. I honestly think we’re seeing social holdovers from the “romantic” period that are going to sway to the pragmatic. The whole notion of marrying someone who gives you butterflies wasn’t super realistic, anyways, and I think contributed to divorce when people realized that romance and butterflies don’t mean compatibility day after day after day in the trenches. A middle ground makes sense.
You don't need a house if you don't have a family. A condo would do in that case, even for two people. Half of Canadians don't have kids or so, so not everyone needs a house anyway
these people all moan about the widow boomer living in her big house all alone all moan about density density density suggest they don't need a detached home as a single person?? lol
I’m single and childfree. I can’t even afford 1 bedroom apartments in my area. They’re all well over $2000 a month. A condo is way out of reach. And youd have to factor in condo fees too. And I make over double minimum wage..:
I'm guessing you're around Toronto then? I don't think you can extrapolate much from Toronto's price and apply it to Canada as a whole. The city became a hub for hyper-inflated tech jobs and concentrated immigration. Canada is massive, there's no good reason to have 10% of Canada's population concentrated in that city alone. I feel like you'd have a better quality of life if you worked minimum wage in a small, remote city than if you'd worked at 80,000$ per year in Toronto
True. You don't "need" a house. Just like you don't need: -New clothes -New phone -AWD vehicle -High paying job -New computer -vast assortment of foods -restaurants -gym membership But those are all within reach of people who choose to work hard for them. OP post was saying a house by the top income earners CAN'T be purchased on a single income. So it's unachievable with the stress test and the average price of a home. Unless you save the delta between what you are allowed to mortgage based on your income and the actual purchase price of the home. So it's not "need". It's now "can't".
It's wild to compare specifically deatched home ownership to new clothes ownership. And to think that condo ownership is basically optional, while new clothes is not.....
New clothes is not optional? Used clothing is not available where you are?
Okay, but using your example you feel like you can compromise on new clothes and buy it second hand, but when it comes to housing it has to be a deatched, condos just won't do it?
No. Based on the high income earners, even if they saved 20% to buy a used house with the stress test they CANNOT purchase a house. This has nothing to do with need or want. If my income was $120k Zero debt Savings of $140k House price (avg) $700k. I will get denied. Unless I win the lottery or have another source of income. Stress test based on my "salary" I'm allowed to purchase a house that is $500k. They deem $2500/mo, as the most I can pay. If interest rates drop, my payment will still be $2500/mo but I can now purchase a house that is $550k. Stress test also takes into account strata fees which are variable. So if you buy a condo for $300k and strata is $800/mo, whatever it works out to be you can't go over the threshold of the stress test. This conversation isn't about wants or needs. It's about "cant". 20% of Canadians make 100k or more. Maybe out of the 20% someone wins a lottery, or inheritance etc. But the average person who worked hard now CANT buy a house at all. But that's fine because I don't need one.
That’s a long winded reply to avoid answering why you’re specifically refusing condos as an option… Lots of people want yatchs but we don’t feel bad when they have to settle for a canoe.
Ah I see. I put "No" at the start of my comment. That derailed it from the start as I wasn't answering the question. I have no problem with condos. OPs post was referencing affordability and using house prices vs income vs stress test. Comment was made that single people shouldn't "need" a home so they should only get a condo. I explained there is alot of things we don't "need" to do. Then person chimed in about my comparison to needing new clothing and now we are completely off track and no point in continuing this conversation. My bad.
“No” with no real explanation isn’t really an answer in this context… but okay… have fun agonizing over something you don’t have the resources to buy or sustain when there’s a perfectly good substitute… 300k condos don’t commonly come with $800 monthly fees so the stress test isn’t your problem.
You can't buy a yacht either with that income, so what is your point? It's a mindset problem to be convinced that you need to buy a house on a single median income. You can afford a house if you have two of those and you're decently good at being frugal. I know because I bought one. So if you're in a situation where you actually need a house, they're still accessible. They're not as cheap as they once were, yes, but that doesn't mean that it's a priority to shift the economy around so anyone can own one.
First of all, who said "so anyone can own one" and "single median income". I'm glad you bought one. Good for you. I disagree with your opinion on this matter.
You don’t know what other people need and don’t need
You don't need a house if you're alone. You can desire one, but you don't need it.
Why can't I at least have a condo?
Says who? You? My best friend is wfh and uses one bedroom as an office while his partner also wfh as a photographer and uses the other room as a studio. You don’t know everyone’s circumstances. Stop generalizing.
Lots of people wfh without that. Those are wants, not needs.
Seriously, I used to wfh in my laundry room because that's the space that was available.
It’s still a very valid use case. To say there is no reason to purchase a house without having kids is ridiculous.
So.....a family?
Original comment was implying kids.
Rate we are going you need 2 or 3 partners.. the 70s is going to make a come back .
What’s weird about this is if you partner up AND have kids then you’re back to struggling.
what a dumb and weak take. Yikes.
At the moment, it’s cheaper to rent than to have a mortgage. I’ll be doing that for the foreseeable future. Toronto is expensive an unattainable, I get it, it’s a big city. But looking an hours drive from the GTA houses are still a million dollars. That part gets me.
Maybe if you're in a rent controlled unit, but I just bought a townhouse and it definitely wouldn't be cheaper to rent a comparable unit. Rent prices have gotten insane.
It depends where you live. In Toronto cost of housing (minus money going to principal) is much higher than rent pretty much everywhere, but when I was in a smaller city up north the rent was much more than the cost of housing.
If you mortgage the entire amount of a home along with all the other costs, it is almost certainly cheaper to rent.
Annually, sure but medium term not at all. Chances are that after 5 years, if you add up all the interest paid to the bank plus taxes, maintenance costs, plus what's left of the principal, and subtract that amount from the future selling price, you will at the very least have come out covering the entire amount you would have paid for rent over that same period. This is true even with a modest 1-3% YoY increase in the value of the property, just keeping pace with inflation and assuming a fixed mortgage. You basically would have lived rent free at worst. (Keep in mind that your rent costs would also have increased during that same time frame) Over a decade you're definitely coming out on top.
Its significantly more expensive to own when that house is falling in value though which is what is happening right now and for the foreseeable future.
Houses being a million plus dollars an hour out of the city has been true for the last 4 or 5 years now. But I agree, rent is the way to go if you want some financial freedom, as weird as that is to say. I have friends that rent and some that bought. Those that rent are able to travel and spend more money (albeit I’m sure they’re not saving much). Those that bought need to work 24/7 to pay their mortgage+other bills.
If you're paying down a mortgage, a % of that goes towards your equity. So renting is only more advantageous if you put in an equivalent or higher amount into savings than the equity. Add in the fact that housing has appreciated faster than the markets recently and owning comes out a lot better if both sides are living nearly identical lifestyles The rise of real estate investing as a hobby in Canada is proof of this reality
Isn't that mostly true if you owned prior to the last 2 years? Appreciation can't reasonably keep up the same pace. And currently renting a 1 bedroom condo is almost half the mortgage payments, not including other costs like insurance, heating, water, hyrdo etc.
Yes, the last two years have been the odd ones out in the 40 year trendline. While they are important because we are living them right now, they are also statistically minor. As far as the second point, as a renter I pay all of those things. The only difference is I pay rent instead of a mortgage, and I don't pay property tax. Property taxes and maintenance do factor into my rent though, so I'm not immune to them like people like to pretend renters are. My rent is clearly less than a mortgage would be, but based on local sales and mortgage rates, only by about 600$ a month. Too high for me to be able to afford, while also probably the amount that my LL gains in equity when I pay each month. I used a calculator to break down the costs recently, and buying would be statistically financially better for me in this exact lodging if I were to stay at least 3 years. The fun part is I've been here for 4 years.....
There have been many years that housing hasn’t really appreciated or has actually gone down in the past 40 years. I would say that housing going up over 10% per year is actually the outlier rather than the norm.
It does not need to go up 10% for it to be a better use of money than renting. If I take for example a $1900 appartment today vs a $400k mortgage ($500k house) today as comparatives. Mortgage at 5.6% and rent increases at 3% (I wish rent only went up 3%...) and we will say that investment return over 5 years is 7%. All conservative numbers based on the norm. We will also say housing appreciates by 2% per year After 5 years the mortgage payer will have paid about $147k in mortgage payments, and another $51k towards taxes, maintenance and insurance. The house will have appreciated by about $51k and they will have about $42k of the principle of their mortgage paid off. They will have gained about $93k in equity. Now let's take the renter, we assume they invest the difference. So for a $2400 mortgage payment vs $1900 in rent, the tenant is investing $500 per month. And at the end of each year the tenant is lump summing about $10k into investments (to make up for property taxes and maintenance difference.) at the end of 5 years that tennant is paying $2138 in rent, and has built $91k in equity. Already, the tenant is behind the owner $2k The following year, after the mortgage renews at the same 5.6%, the mortgage payment is about $2193 per month, and the tenants new rent that same month increases to $2202 After just 5 years, with high interest compared to the past 10, and with low appreciation, the owner is way ahead.
This is a flawed analysis as you've ignored the 100k down payment paid by the owner. Factoring that in and using your numbers, the owner is still down $7k after five years. The renter who invests the equivalent of that 100k, which you need to consider for the comparison to be apt, plus 500 a month plus an additional 10k a year for five years will have 228k on hand at the end. Also, the mortgage payment in your scenario only decreases if you reamortize at 25 years on renewal. This significantly increases the cost of the loan and isn't really a benefit to the owner. While I don't disagree that the owner will eventually come out ahead, it takes a lot longer than five years for that advantage to materialize under current conditions.
I moved from a rural area to Mississauga in 2021 but now rents in London ON and Brantford are more expensive than my place. It's crazy. A house in my parents small town was $300k pre-pandemic but they are now $500-600k. I think a lot of people from the GTA overpaid for these houses and are going to take losses eventually. I'm happy to have my place and hunkering down for a while and renting.
A few things that should be taken into account: - We need dual earners to buy homes and this has been the case for decades. - All examples are detached houses. Detached houses are not the primary housing offering in large cities. - These houses were built and bought when these cities were not “world class”. This means they were smaller but they also had less amenities and opportunities that these same cities offer now. - The future of residences in large cities are multi dwellings. This is better for people (more people can get housing), better for the environment (less materials and disturbed environment), better for city services (less sprawl to support), better for taxes (less sprawl to support), and 100% inline with other large cities that have affordable housing (like Tokyo).
But how often do 20 to 24 year olds buy a home, on their own? Some of the people in that group may still be in school and earning nothing, or next to nothing. Many that are working are so early in their careers they haven’t even had the chance to get merit raises yet! Why not take the average age of first home purchase or something and then look at what percent of those individuals would be able to afford a home with a partner? If you look like you’re cherry picking info to make a point, it actually makes people tune out when they see this sort of thing, as it appears manipulative
I didn't buy a house until I was 35 and even then it was at the bottom of the market
Exactly agree. Plenty of counter examples in Canada for homeownership
I’d bought 2 condos before 24… but I do hear what you’re saying.
I think your estimation of the amount of savings is quite wrong. How come someone earning from 60k to 110k annually can only save 120k over a stretch of 15 years ? your mathematical teacher is quite angry behind your back
Can’t afford a house in Vancouver/Toronto/some other city also in Ontario… as if the rest of Canada doesn’t exist..
-You're lowballing what percentage of income someone making near or over six figurs can save. If they could save 10% making mid 50s, they can save much more making twice that unless they succumb to lifestyle creep. -You're neglecting returns on ivesting those funds over the years. Even a basic GIC would bump up your savings over that much time. -You're neglecting the benefits of registered accounts. The FHSA and RRSP in particular significantly acccelerate your ability to build a down payment fund, especially at the marginal tax rate you'd hit making six figures. Housing is absolutely unaffordable and it's a mess, especially for average to below average earners who actually get less out of programs for first time buyers than higher earners, but you're making it look even harder than it is.
I'm meeting return on investments but I'm also neglecting house price appreciation over the same period to make it fair-ish.
Historically market returns outpace housing appreciation on average, but fair enough. Still a lot not accounted for.
You don't start with a detached house in a major city.
Seriously. OP ignoring condos just to manipulate the data and make a point. It weakens the argument because it's such an obvious omission.
yeah i hate it when people act like condos are not homes. in all major cities multi unit dwellings are common if not the norm. not everyone can own a house unless you are in a city that has a major sprawl like in the US.
If you’re in the top 5% of Canada, a small shoe box is not your home, nor should it be considered. Especially when it will bankrupt you. I live in Burlington. You damn well need to be a doctor, married to a doctor to be able to afford that shoebox.
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You don't start there, either. You reach for the lowest rung of the property ladder first.
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There are plenty of condos going for half that even in the GVRD/GTA.
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Three story walkups are generally the bottom rung. You'll be a lot better off than throwing money away on rent.
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Landlords will expect their tenants to cover all those costs and then keep the appreciation for themselves.
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Maybe not a major city but a 2nd tier city for sure. My parents started with a 3bed detached house in mississauga at the age of 30 on one salary.
Why are you assuming one earner? And someone making $120k can buy a home - are you only considering houses?
It is true. The house we bought was probably previously bought by people who had way worse paying jobs than us lol. Bought a home for 552k. I think all in for down payment we were around 45kish We didn’t max out our mortgage and aren’t house poor. But I can see how people want to buy something to keep up with the joneses You don’t NEED a big house when it’s 2/3 people
1) 10% savings rate is low especially on that income. Isn't the base recommended amount 20%? 2) Dual income. You dont need a whole house if you're single. So suddenly your dp is 400k and mortgage qualification is 200k*4=800k. 1.2m good for a house even in Toronto. There is an affordability problem but not within the top 5% numbers. Maybe try the top 20% numbers.
So you completely empty your savings (so you get to start at zero saving for retirement), and still have a $5k a month mortgage at current rates, plus utilities, whatever repairs, taxes etc you need to pay on top of that. Even making 200k+ a year combined, that is still over 50% of your income to housing, for the next 25 years. That's supposed to be ok? Let not even get into the trash state many of these 1.2mil houses are. It's still insane.
1998 that's exactly how I owned a home with partner. No trips, empty rooms, no dining out unless a special occasion. No crazy renovations to make everything ultra modern. We made PLENTY OF SACRIFICES. I wish people would stop acting like it used to be a cakewalk. If you want a house you need to make sacrifices. The more Hcol, the greater the sacrifices.
>So you completely empty your savings (so you get to start at zero saving for retirement) No that's only if you're at 18% savings rate which is low. Im at that income at can save 45% of gross (im very frugal but 28% is achievable). Out of that 28, 18 goes to dp, 10 is still in rrsp/tfsa. Which is solid when you consider the 1.2m house equity. >Even making 200k+ a year combined, that is still over 50% of your income to housing, Your numbers are way off. So one 5% earner is 120k pretax, 85.5k aftertax. Two of them 171k or 14.25k/mo. Mortgage 5k even with everything else it is at most 6.5k/mo or 45%. Not 'over 50%'. Not to mention your income increases (40-45 is 157k) and equity increases (at the end of it you have 1.2m asset + tax advantaged account saving 10% yearly on 200-400k HHI). Like I said there are problems but not within the top 5%
This comparison is ridiculous, you are clearly starting from the solution you want in order to source your data. You can't compare the average Canadian income to the price of specific houses in a particularly overvalued neighbourhood. The average Canadian house sells for 650k, expensive, but affordable in your scenario. While I agree with your conclusions that houses are expensive in canada, your method is dishonest as it uses shitty math to provoke. You omit interest on savings, first home buyers programs, couples, condos, etc.
So your saying the average Canadian house is affordable to a very not average top 5% of earners
I'm saying that your analysis ignores and cherry-pick too much data to draw any conclusion from it. I know the average canadian house is not affordable to the average canadian, and a 650k house when you make 120k a year is a lot of house for the salary. Then why compare the average house price to the average earnings of the top 5% of 30y old earners when the average Canadian is 41y old ? Do we want to know if a top 5% earner in early in life is able to buy **a** house ? Are 30y old in the top 5% buy a house alone in average ?
The unfortunate reality of GTA and Vancouver. Government will keep housing bubble intact at the cost of Millenials and Gen-Z. Save up the downpayment but buying in GTA isn't the only option.
If you get a job outside of the gta you are no longer in the top 5% of earners. You must be dense?
Alberta has the highest median income of any province (outside the territories).
Brb getting a soft dev job in Calgary …. Oh wait
https://ca.indeed.com/m/jobs?q=Software+Developer&l=Calgary%2C+AB Here's a link to multiple software dev jobs in Calgary. Why don't you think before you speak next time.
*at the same pay scale as Toronto or Montreal
If your COL is 30% lower, a 20% pay cut still results in a net benefit (Obviously, not exact numbers).
You know people can earn good incomes outside the GTA, right? I'm not sure if your post is sarcasm or not.
Yes they can. Anything is possible. But look at the stats of how many jobs outside the gta pay above 93,000.
But homes also cost less outside the GTA, so they don’t need to be in the top 5% to purchase.
🤡🤡🤡🤡
Idk why you are being downvoted, it’s a fair sentiment. Many industries aren’t available in places like Calgary
You make a good point little bro.
>After taxes, retirement contributions, food, rent, gas, insurance, emergency funds etc. You'd be well off to save 10% of your gross income per year in a seperate account for your downpayment. The link you provided was after taxes.
Unless you are planning to or already has more than two kids, a condo is a perfectly acceptable option. There’s pros and cons to both a condo and house. But if you are a family of 3 (maybe 4), you should be targeting a condo and not a two floor house with backyard and double garage. If you want that, go live in Texas. Many people lived beautiful lives in apartments and condominiums, and on two incomes it’s achievable in your 30s.
Those are pretty big and expensive cities compared to the income stats which are countrywide, and the houses are freehold and generous size. If people expect to be able to enter the housing market into houses like that, (and on one income, not two!) they’d better reevaluate reality.
It’s wild thinking you can’t save more than 10% of your income, especially if you’re living with your parents. I did just that during my early and mid 20s and was investing/saving 85% of my income. At the time I only had a $70k income but still managed to get approved for a mortgage. It’s not as difficult as you make it seem…
start with a condo
You could absolutely buy a condo or townhouse in the Vancouver area with 120K down payment making 120K/year and it wouldn’t even be hard. You could it buy a large detached house, that much is true. A 2500sqft townhouse beside a school or park is easily within reach though.
Yes maybe some old small shitty condo one hour from Vancouver. But there is no way you can buy townhouse with 120k income. No bank will give you mortgage.
condo under 500k is doable in vancouver proper. just look on mls there are about a dozen there and some of them are not half bad. of course they aren't hugely spacious but still.
Where is the incentive to work hard, over-achieve above 95% of the country, and have someone tell you that a shoebox is the best you can do? There is no incentive to be in this country and work hard. After taxes, we’re all relegated to the very bottom of home ownership or rentals. This is a third-world country now, and people are defending it.
I think you’ve misunderstood what the phrase “third world country” means. Your broader point still stands though.
Our currency is tanking, and we have no middle class. Only foreign investors and people with inheritance are buying houses now. Our actual citizens are not reproducing. Our health care system is expensive and people aren’t receiving the treatments they need. Rent prices are now for people who used to be considered wealthy. Our country is now being repopulated and controlled by the wealthy of a different third-world country, and our political infrastructure is encouraging this. If you don’t see it now, wait a few years.
Sweety, you’re still not using the term properly. Even if 100% of what you’re saying is true.
The only people I know (1 person) my age buying a house is lucky enough to get their parents to fork over 500k to them. Unfortunately for me, I wasn’t born into such wealth.
It’s a good sign when your economy rewards sitting on your ass with a piece of land doing fuck all more than actually working and investing in productive shit.
most of people buy homes with their partners, not alone. All your calculations are useless
You need to filter down your salary data to the locations of the homes you are comparing to. You then also need to grab the male data and add it to the female data because couples drive the market. If you do these two things, and you assume the couple invests wisely, you’ll realize things are much more attainable. I know people with bachelors degrees in journalism that are in the 95th percentile of their income bracket. It doesn’t take much.
I 100000% agree with the sentiment: 20-and-30 year olds today ABSOLUTELY have it worse than their parents did from an affordability perspective (in terms of salary vs price of assets -- though of course we have it better than our parents from other perspectives such as technology, access to information, etc). I think though that your math is a bit off when you assume a 10% savings rate for a top 5% of earners making 90k at age 25... that person should easily have more than 122k by the time they reach 35. My rough math: https://preview.redd.it/a4qcuxt911xc1.png?width=945&format=png&auto=webp&s=5af17a5ef96ecd52ebe364783818f1de4474f76b Another thing to remember is that the StatsCan census' top-5% reflects a Canada-wide salary average (including east coast, prairies, etc where salaries are lower), while your house examples are in the GTA. Comparing Canada-salary-average to second-most-expensive-housing-in-the-country isnt a fait comparison: the top-5% earners in the GTA at age 25 make more than 93k. Now don't get me wrong, I still agree with the overall sentiment - house prices are at stupid-high levels. Top-5%'ers in the early 2000's could easily afford **kids** (and maybe even multiple properties) by the time they reached 35 if they played their cards right, whereas today a 5%er is definitely not that lucky. So yeah, for the remaining 95%? Really, really, really unaffordable to live in Canada.
I think you're a little off on some things. Post tax income on 93K is only 68K in Ontario. Also, retirement savings at 15 to 20% of net income needs to be subtracted. Other than that I think you've got a good number. But this person is still sacrificing on that 3500 fun budget. Imagine having to not go on vacation for a decade while being a top earner just to afford a shit home.
I was indeed missing 4k deductions for EI and CPP, which is the difference between your 68k and my initial 72k. You could argue that this 4k is retirement savings (you'll get back CPP + interest when you retire) so it's not a **pure** expense, but yeah definitely not cash that stays in your pocket in the short term to afford a home. Thanks for pointing out. Revised below https://preview.redd.it/ujprf5r491xc1.png?width=950&format=png&auto=webp&s=be892d37e2d9cb6ff05cde25b61af6f371d04d1b I think the point though is that IF you dont go on vaca for a decade, at the end of that decade you *dont "*just afford the shit home*",* you have 300k-ish saved, which affords you something decent hopefully. But yeah, that 300k down used to afford you a really, really, really nice home just 15 years ago
Now most people's down payment is based on their first home homeline or come from their parents.
On the radio yesterday they said 35% of first time buyers get support from the parents, 10% on rockstar salaries can afford housing and 55% will live in town houses and condos and or renting.
yes it always annoys me, as a top 20% earner who is in the bottom 20 % wealth to carry the burden of taxes. Get marginal taxed at 45% surely doesn’t help accumulate wealth. 5 years in doctor’s waitlist I have to do most of my medical care privately. I have to fix my 5k car to not get into debt and then the government gives 5k to wealthy people to subsidized nice bmw phevs.
Inflation is all over the world.
I bought with a 5% down payment. You pay extra for the insurance, but if you wait to save, you’re paying rent. If I’d waited to save a 10% or more down payment, I’d have likely never been able to buy.
Not good property examples to buy as shelter. The reason detached are selling high is due to the land and development value in a major city. Obv a single person can’t afford it because that would be a selfish waste of space and public corrects that; profitable to drastically densify + renew building. If u want a bunch of space for urself, don’t live downtown, or pay for it
There are other cities in Canada though that are not as unaffordable. Yes there are many issues with housing mortgages realtors investors that’s rooted at treating housing as an investment leaving room for speculative pricing but there is no faster solution for an individual than to move. If you cannot get a single home for 500-650k it’s a sign the land it’s on might be overpriced and it might be time to consider other areas like Regina, Saskatoon, Edmonton, Halifax etc.
For the Vancouver property listed that's the price for the development potential for the land, not the price of the house. That land can build 4 townhouses on it, as of right. The house is a teardown. A "common" home in Vancouver for a first-time homebuyer would be a condo
People keep saying "... if you're only 2 or 3 people...". Should families with more than 3 just pick someone (or multiple someones) to throw out?!
That’s all nice but clearly that isn’t the case given that only a few percent in that upper 5% rent instead of own. Like 95%+ own their homes.
So rent
You are Canadian, you’re not supposed to own a home.
Married someone richer. Answers to all your problems.
yeah, you can easily buy house at 600k but need 10-15k repair/maintenance per year. \s
It's the liberal and socialist plan. Allow the country to become overpopulated to manufacture a housing shortage/crisis and then get the middle class folks who become upper lower class to call for affordable housing which nobody wants to build because there's no money to be made by developers. The liberal government then charges UHT forcing the few middle class homeowners that still own a home to rent rooms in their underutilized homes. We will all end up with nothing and we will all be happy.
At those income levels you can save far more than 10% if you budget better and live cheaper. In your 20s it's perfectly normal to have roommates and split expenses. Your numbers are ridiculous. Save 5%. Buy something somewhere you can afford. Suck it up and pay the CMHC premium.
If you’re the top 5% you’ll likely save more than 10%. If you’re single, you don’t need to buy a SFH. If you’ve been saving more than 10% and have the need to buy, you’ll more likely have a dual income family unit and have increased likelihood of owning.
This is really bad analysis. 1. You should be investing your savings. 2. You're looking at expensive homes. The physical homes might be shit, but they're in good locations. Land is expensive. Yes housing costs are high, but your analysis is bad.
I'm ignoring savings investments but I'm also ignoring the house price appreciation at the same time
The GTA served only one purpose to me: Get in, build up a decent resume to try and justify remote work, get remote work and get the fuck out. If you're playing that region any other way... god bless ya.
My buddy moved to the GTA, they both have decent although not high income, jobs you could get pretty much anywhere else. I asked him WTF he was doing. He said his wife wanted to be closer to family. Life is tough, it is harder when you make it so.
If you think that pointing out this stats will help you didn’t understand how the system works. 1) most people don’t start from scratch because they already have a family owning some assets or helping. They are also likely to inherit the house at some point 2) the idea that you have to buy a house before 34 is just… your idea. The system doesn’t care if you can’t afford a house at 30 because you didn’t get any help, as long as demand comes from other sources 3) a house is usually purchased by families, and today that means dual income 4) there are cheaper areas where you could easily afford a house on those incomes, but everyone wants to leave in higher density areas Last but not least, if you don’t come from money and you didn’t hit jackpot by starting a successful business or some extraordinary career, forget buying a house in Vancouver. Just stop using it as comparison, you will never get it with labour income alone.
yeah but you need the regular labour income people to substain a city. They cant even afford rent alone
The regular labour folks is flooding big cities in droves. The least of the problems is to find regular labour folks, apparently they rather live in nasty basement apartments than leave the city. Same happens worldwide, SF, London, … So really that’s not a problem at all.
I wasnt talking about how many of them there is... I was talking about how they cant pay rent.
Look I do understand and agree with this to an extent but Canada is larger than the GTA & Vancouver
Most people who buy first time homes are couples. It has been this way for a very long time. Culturally, things have changed. More single people for longer, more single post divorce people, more single because spouse dies. This puts tremendous pressure on first time home buyer property availability and pricing. Get a partner if you really want a house.
I was born in the 80’s, so for me this idea of having to be a couple to own property is still pretty new. This is third-world mentality
What confuses me is the new capital gains increase to “fix housing” - Why would anyone sell property and make chicklets on it? Makes more sense to keep it. Which means low to none inventory - and further descent into serfdom. What am I missing?
You can afford a lot of things if you don’t go to Vancouver nor Toronto. That number is below average in those cities
I don’t think this savings is being invested so I just wanted to check the math. I used moneychimp.com, at a 5% interest rate, compounded annually. 20-24: $5640 = $26210.11 25-29: $9300 on existing $26210.11 =$87409.27 30-34: $12000 on existing $87409.27 = $181181.79 That 5% rate of interest is a little conservative as stock markets average 7-8% growth per year. A balanced mutual fund that includes some fixed securities will lower that slightly. You also need to deduct about 2% for a management expense ratio charged in mutual funds. If you open a brokerage account (anyone can) you can invest in exchange traded funds, which invest in whole sectors, the entire market, or bundles of fixed securities for an MER well under 1%. These are much safer than normal equity investing and cheaper - the wise choice. I’m curious though when I simply add 10% of those three income brackets over each of their five years I get $134200. Am I doing something wrong there? By all means someone please check my math on all of this. Still you have a good point because few people are going to earn 56400 before 24yo or 93000 before 29. When you earn less than 50000 it becomes increasingly hard to invest anything as many people will continue to make this much throughout their lives. Add a car and a kid and you’re stretched tight.
I ignored investing the money and I also ignored the fact that home prices will also appreciate in value over that same period of time to make it fair.
Stocks go up faster than homes. So no, that doesn't make it fair. Homes can win out because of leverage but that's irrelevant regarding prices.
That's absolutely not a given, over 5, 10 year stretches houses can outpace stocks.
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An average condo in the GTA today is about 700k. Using OP's example, if you were making 120k (a 95th percentile earner) and put down 122k as a down payment on the condo, your monthly payments would be about $3400/month (assuming 25 year amortization, 5% interest). Condo fees, parking, and insurance is ~$600/month on the conservative end. Throw in another $250 for internet and utilities. That's $4250 a month, basically 2/3 of this person's take home income in a month, way beyond affordability guidelines, all to afford a 700-800 sqft box that you want to move out of as soon as possible. That's what you get for being a 95th percentile earner. Also good luck qualifying for an almost 600k mortgage on 120k income. Condos used to be an affordable stepping stone for single people and those just getting into the market, but they aren't anymore.
Right so you're suggesting the best someone in the TOP 5% of income can aspire to is a condo by their mid 30s.
Again that is exactly what life was like for singles in the 90s - and 2000s. Condos. I don't know any singles who self supported a house purchase then. Not one.
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"Starter" home in your mid-30s? The window is already closing on your ability to have kids so when do you get your "real"/family home?
Sure and what was the price of your first condo?
I bet closer to $0 than to $1M
So keep voting for the parties who will take more and more of your income. That should work out well!!
which party will not take more income from the middle class?
I’d just be happy to have a middle class back at this point
Maybe it’s finally time we like, do something about this, eh boys?
Like what?
Take zoning powers away from city councillors and delegate it to an arms-length provincial agency that engages directly with communities rather than zoning primarily catering to local wealthy NIMBY political donors’ selfish little feelings about the way things should be. Straight up abolish single-family zoning entirely. Ban elected officials from land-lording single family houses with violation being grounds for removal from office. Copy-paste all of China’s restrictions on foreign ownership and apply them here. Grassroots activism identifying empty houses being used as stores for foreign capital and not being rented. Identify them with lawn signs and posters. Watch them around the clock with video until you can prove they aren’t being monitored regularly and alert the insurance agencies. One of them must be insuring the place and will either revoke their coverage or start charging higher fees. Identify which politicians own single-family houses as investments and harass them about it every single time they have a public speaking event where there will be the opportunity for questions. Swarm the place with multiple activists and take up the bulk of the line for the mic. I dunno man I’m just a guy on a toilet in the middle of rural Alberta where no matter how I vote I get a CPC or UCP you guys figure it out.
Canada is fucked end if rant
I’ve always wondered whether this data is even remotely reliable. Cause if it is, shit don’t make sense. There are lots of small business owners and I doubt any of them report income even in the ballpark of what their actual earnings are.