Why Gen Z Canadians can’t afford to buy a home

I recently shared an article about the unaffordability of housing in Canada to my Facebook page, and someone commented with the following:

Sounds like when I was in my 30’s. Worked 2 jobs and figured it out.

The person who said it is retired now, so it’s been decades since he bought that house, and I’m not sure he realizes how much housing prices have changed.

Take my house, for example.

We bought it in 2006 for $75,000. When we refinanced our mortgage in 2018 to redo our roof and renovate our kitchen and washroom, it was assessed at $210,000. That’s nearly triple the value.

The thing is that wages haven’t tripled during that time.

And that made me wonder how much housing prices have changed over the years relative to wages.

So, I consulted average weekly wage data from Statistics Canada and home price data from the Canadian Real Estate Association. I used January 2005 as the starting point for both. As well, I used the MLS HPI Aggregate Composite Benchmark for the housing data because it’s seasonally adjusted.

In January 2005, the average weekly wage in Canada, seasonally adjusted, was $725.52. 17 years later, that had increased to $1,156.85.

During the same period, the average housing price went from $221,200 to $820,000.

Now, both of these charts seem to paint a positive picture: housing prices are up, but so are wages. That’s good, right?

Well, watch what happens when combine the two graphs and show the annual percentage increase relative to 2005.

Wages have indeed grown over the last 17 years, but only by about 60%. Housing prices, on the other hand, have ballooned by over 270%. That means housing prices have increased 4.5 times faster than wages have over the last 5 years.

Let’s put this another way.

In January 2005, with a weekly wage of $752.52, it would take the average worker 305 weeks to save enough money to pay cash for the average home price of $221,200. That works out to about 5.86 years.

17 years later, it would take that same worker 709 weeks to save enough of their weekly wage of $1,156.85 to buy the average Canadian home, priced at $820,000. That works out to 13.63 years.

And remember, that’s assuming they don’t spend their paycheque on anything else but saving up for a house: no food, no phone, no gas, no rent, no utilities. Nothing else.

If you want to know why people complain about not being able to afford a house, it’s because housing prices have shot through the roof but wages haven’t.

It’d be a lot more challenging for our friend to do today what he did 30 or so years ago.