In this special episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard…
Buying a home in Halifax has been a rollercoaster ride for almost two years now. Halifax used to be a fairly affordable city, but it has become increasingly expensive since the pandemic hit. As more people leave bigger cities to settle on the east coast, prices have experienced massive increases. While it’s still less expensive than cities like Toronto and Vancouver, buying in Halifax requires careful planning.
As of right now, how long does it take to save for a home in this city? The answer depends on many factors, and of course every buyer will pay different amounts for their homes. However, here’s what you need to know to help work out your expected expenses.
Down payment size
Your down payment is the biggest upfront cost of buying a home, so it will likely take the longest amount of time to save for. The size of your down payment will obviously influence the time it takes to save up for it as well. As you likely know, your down payment needs to be at least five per cent of your home’s purchase price, and at least 20 per cent to avoid mortgage default insurance. If your home is over $1 million, though, you must have that 20 per cent saved up.
The length of time it takes to save your down payment depends on your income, and how much you can put away each month. A five per cent down payment on a $500,000 home will be much smaller than a 20 per cent down payment, for example, and will take less time to save. It can take as little as one year, or more than five years, to save for your down payment.
How much do you want to spend on a home? We’ll review some prices in the Halifax Regional Municipality (HRM) later on, but your budget depends on your income and savings. This will impact how long it takes to save up for the home you want to buy. As a point of reference, the average annual income for a Canadian is just over $54,000 and the average housing price in Halifax is about $472,000. Plus, once your down payment is made, you have to make sure you’re able to afford mortgage payments, utility bills, and closing costs. Knowing your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios can also help you figure out your budget. You can learn more about debt service ratios here.
The amount of time it takes to save up for your down payment depends on how much you already have in savings. Many people actively save for a home with regular contributions to a separate account to help them reach their goal. Recommendations vary depending on the source, but it’s often suggested you save 10–20 per cent of your monthly income when looking to buy a home. It also depends on the age you start saving! An article from the Consumer News and Business Channel (CNBC) gave recommendations on the amount you need to save each month if you’re starting to save at age 20, 25, and 30, for a five, 10, or 20 per cent down payment. Of course, this is in American dollars and using American housing trends, but to give you a general idea, they recommended monthly amounts ranging from $51 USD to $808 USD.
Prices in Halifax
According to Royal LePage, the average housing price in Halifax Central is $793,333, and in Halifax South it increases to $1,130,703. These are by far the most expensive areas in the Halifax-Dartmouth region and will likely take you the most time to save for. These high prices are largely due to the convenience and accessibility of their locations, and the number of waterfront properties.
Areas further from central Halifax, including Dartmouth neighbourhoods, have price ranges from below $300,000 to over $600,000. Even though these are far more affordable, these prices are still up to $100,000 higher than they were pre-pandemic.
According to Halifax Condos, the September price of a condo in the Halifax Peninsula was $418,812, a 17 per cent increase from 2020. Condos spent an average of 30 days on the market, a nine per cent decrease from 2020. Low inventory is leading to higher condo prices and faster selling rates. If you’re hoping to buy a home in Halifax and have your eye on a condo property, be prepared for similar levels of competition as with detached homes.
According to the Canadian Magazine of Immigration, the September average price of a detached home in Halifax was $471,746, a 23 per cent increase from the month before. For comparison, in September 2018, 2019, and 2020, the average prices were $298,194, $320,941 and $384,001, respectively. Detached housing prices have skyrocketed meaning, in many cases, they will take longer to save for than in the past.
The bottom line
Saving for a home in Halifax takes more time today than it did one or two years ago. A lot also depends on your savings, down payment, and budget. If you want to buy a home in Halifax, you should get in touch with an unbiased mortgage broker to review your options based on your goals and financial situation. We can help you decide on a realistic budget, and determine the best types of lenders for your needs.
If you have any questions about buying a home in Halifax, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.