first-time-buyers-save-home Photo: KMR Photography/Flickr

It’s easy to see why some observers have questioned the efficacy of the federal government’s recent mortgage rule change when it comes to cooling the Toronto and Vancouver housing markets. The measure, which came into effect February 15th, increased the down payment on the portion of a home between $500,000 and $1 million.

The average home price in both of these markets is over half a million, making a larger share of transactions in Toronto and Vancouver susceptible to this change, yet home prices continue to soar in both cities.

In March, the average GTA benchmark price was up 11.6 per cent from the previous year, and Metro Vancouver’s surged 23.2 per cent.

However, National Bank economist Matthieu Arseneau tells BuzzBuzzHome News the measure “can cool the market,” and he came backed with a chart from his bank’s latest Housing Affordability Monitor.

nb-chart-affordability

This hockey-stick graph (above), displays how much longer it will now take first-time buyers to save for a minimum cash downpayment in the census metro areas of Vancouver, Toronto and Montreal following the rule change.

For its calculations, National Bank, Canada’s sixth largest bank, assumes households earn the median income for their city and will save 10 per cent of its pre-tax income for a downpayment. It pulled Statistics Canada figures up to 2013 and filled in the data gap with average weekly earnings growth for the rest.

Montreal saw no upswing in the number of months it would take to save up for a downpayment because the median price of a home there is $300,639, far below the new measure’s scope.

But in the first quarter of this year in Vancouver, where the median price of a home is $821,854 and the median income is $64,242, the number of months needed to save for a downpayment surged 34 months to 106.8 months, or more than nine years.

Median earning Toronto households take home $66,307 annually. At the city’s median home price of $621,914, buyers here will also need more time (11 months, as of the first quarter) to get into the market — if they have to pay their own way, at least.

It will now take the median-earning Toronto household 67.3 months, or about five-and-a-half years, to sock away enough cash.

“That’s significant,” says Arsenault of the Canada-leading increases in Toronto and Vancouver.

For median-earners, saving for a downpayment takes far longer in Canada’s hottest markets than in all other large cities National Bank tracked. The average across 10 major Canadian markets hit 34 months in Q1, up slightly from 32.9 one year prior.

Quebec City is the market in which median-earners will have the quickest path — 17.4 months — to accumulating a downpayment, followed by Winnipeg, where it takes 19.6 months to save up.

According to National Bank’s research, here’s how long it takes first-time buyers to save up for a downpayment in 10 of Canada’s biggest markets:

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