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It takes six years.
That’s roughly how long a would-be first-time buyer in Calgary’s resale real estate market needs to save for a down payment.
If that sounds lengthy, it’s short compared with many other municipalities included in a new study from Point2Homes, a real estate search provider.
“For first-time homebuyers, it’s a grind to save up for a down payment,” says Nevin Jones, realtor at Re/Max Complete Realty in Calgary.
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The new study suggests as much, examining how many years it would take for a buyer to save for a 20 per cent down payment on the average priced home, based on census median individual income.
The study looked at 20 different Canadians cities and even different age groups.
Among those likely first-time buyers — young millennials (aged 25 to 34) — it found that Calgary ranked as the ninth most affordable market. Here, a first-time buyer would have to save 6.2 years to have a 20 per cent down payment on an averaged priced home worth about $303,000, based on a median income of about $49,000.
In contrast, the longest time to save was in Markham, Ont., at 15 years. Buyers had a median income of about $45,000, requiring more than $133,000 for a 20 per cent down payment on the average home price of about $668,000.
The reality is that most first-time buyers have insured mortgages, meaning they have saved up less than 20 per cent for a down payment. Canada Mortgage and Housing Corp. and other insurers allow buyers to have as little as five per cent for a down payment.
Most first-time buyers in Calgary have down payments that are five or 10 per cent, says mortgage broker Matt Legett, senior vice-president at Ratehub.ca in Calgary.
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“The ones that end up putting 20 per cent down are usually getting gifts from parents or are more established with their careers, and have waited a little longer to buy their first homes.”
Jones adds many first-time clients fit that description, particularly those seeking to purchase a single-family detached home.
Five years ago, single-family homes were the first choice for new buyers when its benchmark price in Calgary was about $520,000. Today, the benchmark is $762,000, Calgary Real Estate Board statistics from August show.
“From my experience, the price range for first-time home buyers with or without help from parents seems to be under $650,000 for detached,” he says.
Increasingly popular are semi-attached homes or townhomes priced at less than $400,000. As well, condominium apartments for less than $275,000 are popular among first-time buyers, Jones says.
The benchmark priced detached home is indeed a hard sell, based on recent mortgage costs.
Leggett points to a home with purchase price of $750,000 with a five per cent minimum down payment of $50,000 and a 4.09 per cent five-year fixed mortgage. Its monthly payment would be $3,865.
Recent federal changes allowing for 30-year mortgages for first-time buyers, starting in December, will reduce costs. The monthly payment on the $750,000 home, for example, would fall to $3,499.
Even still, dual-income, professional millennials would be challenged, Jones says. He points to working with one such couple that recently purchased a single-family home for about $500,000.
“They were able to do it, but it took them 10 years to save.”
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