Photo: Flickr / OTA Photos

It appears that the average millennial has the worst luck of the draw compared to the economic circumstances enjoyed by previous generations, and this is not just when it comes to finding meaningful and gainful employment.  A new report released by has also pointed out that new homebuyers will have an incredibly difficult time to actually buy a home at affordable prices, because home prices have actually reached a near thirty year high when it comes to the home affordability index.

The home price affordability index is a measure of home prices in relation to average household income levels within Canada. When it comes to measuring whether homes are affordable, a ceiling benchmark of thirty percent is set in order for housing costs to be considered the start of being unaffordable. In other words, if a household spends thirty percent or more of their household income on housing costs (for example, rent or mortgage payments, along with property taxes and utility costs such as hydro), then housing is considered to be on the verge of unaffordability. On the other hand, a home is considered affordable if its residents spend less than a third of their income on such costs.

Unfortunately, according to the report penned by the Royal Bank of Canada, home prices across the country, and Vancouver and Toronto in particular, have resulted in an average affordability cost of over 46 percent – a level that has not been seen since the 1990s when there was a strong economic recession occurring at the time. The report singles out Vancouver and Toronto as the most unaffordable places to live in Canada. According to the bank, it would take a whole 80 percent of one’s salary to pay the shelter costs in an average home in Vancouver, with Toronto coming in at nearly 75 and a half percent of those same costs. 

Finally, the report points out that provinces outside of Ontario and Vancouver are quite stable in regards to housing costs versus income when it comes to looking at long-term price trends, even if they are currently above the norm at around 32 to 35 percent in the Prairies and in Quebec on average. However, the problem is not just home affordability, but also debt. With the average Canadian holding a massive 1.67 times of their average annual income in debt costs, it appears that it is nearly impossible to pay off one’s monthly expenses without resorting to some sort of borrowing. 

Published Date: Oct 30 2017