Not even a global plague can stop Canadian home prices, much to the dismay of renters who want to be buyers.

Neverending home appreciation is forcing young people to wait longer and longer to get their foot in the ownership door. For many, that means waiting well beyond 40 to buy their first place.

It’s a trend that’s been ongoing for years, becoming more and more common recently. In the last year alone, home prices have rocketed another 15%. Since 2000, they’ve soared 270%.

While 2020 data isn’t available, the average age at which a first-timer bought a new home in Canada was 36 years old as of 2016, according to BMO data. But the majority of existing homeowners at that time had already made their first home purchase before their 30th birthday.

Looking at ownership rates for 30-year-olds in 1981 vs. 2016, 55.5% of baby boomers owned their home by the time they were 30, while just 50.2% of millennials could say the same in 2016, according to StatsCan.

More recent data from 2018 suggests that more than 1 in 5 first-time buyers were over 45.

Incomes not keeping up

One of the biggest determinants of home affordability is, of course, income. And incomes have not kept pace with rising house prices over the years.

Way back in the day, it used to be that a house was considered affordable if it was three times your gross household income. By that measure, homes in markets with nose-bleed prices — like the city of Toronto — would have to be priced near $294,500. That's just a “little shy” of Toronto’s current $810,300 average price tag.

Here’s a quick and dirty comparison of housing and income figures from 2000 and 2020.

2000 2020
Average house price $163,951 $607,250
Average income* $33,800 $57,947
House price-to-income ratio 4.85 10.48
Mortgages**
Insured mortgage down payment (6%) $9,837 $36,435
Average insured 5yr fixed rate 7.84% 1.59%
Average monthly payment $981 $2,219
Interest paid over term $48,415 $39,944

*Source: StatsCan’s annualized average weekly earnings for individuals. **Figures are unadjusted for inflation.

The saving grace for today’s buyers are record-low mortgage rates.Yes, they've driven up home values massively. But they've also boosted buying power and slashed total borrowing costs. These latter benefits, however, may not improve much more in this interest rate cycle.

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Engaging a mortgage broker before renewing can help you make a better decision. Mortgage brokers are an excellent source of information for deals specific to your area, contract terms, and their services require no out-of-pocket fees if you are well qualified.

Here at RATESDOTCA, we compare rates from the best Canadian mortgage brokers, major banks and dozens of smaller competitors.

Canada not alone

Aging first-time buyers are not unique to Canada. There's a similar phenomenon south of the border, where the average age of first-time homebuyers is now 33 years old—the oldest in records dating back to 1981, according to the National Association of Realtors.

In Australia too, the average age of a first-time buyer has risen from 27 in the early 1990s to 31 as of late 2017.

Yet, homebuying intentions remain strong among young Canadians. One in five (18%) say the pandemic has accelerated their plans to purchase a home, according to Scotiabank. Albeit, one-third said they plan to hold off until prices come down, which has been like waiting for Godot.

Until that ”sale” on prices happens, hefty home values will keep vacancy rates low in parental basements. That's going to make 40-year-old housing virgins out of more of us.

RATESDOTCA Team

The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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