Home prices in Canada’s biggest markets have fallen from peak levels, but it’s going to take a much bigger dip to put ownership within reach for the typical Millennial.

How much bigger? According to a new study from Generation Squeeze, the average Canadian home price would need to plunge by $223,000 to be affordable for a median-earning full-time workers between the ages of 25 and 34, common bookends for the Millennial cohort.

But far more dramatic drops would have to sweep through the country’s most expensive markets for local buyers to stand a chance, the housing-affordability advocates suggest.

In Metro Vancouver, home prices would have to plummet by $795,000 — that’s more than the benchmark price of a Canadian home, which was $621,700 as of April, according to the national real estate association.

For the Greater Toronto Area, prices would have to come down by two-thirds the current level, or a whopping $523,000. Even in relatively affordable markets in the Prairies, it would take considerable corrections. In Calgary, a price drop of $148,000 is required, versus $76,000 in Edmonton.

To be truly affordable, a homebuyer shouldn’t be spending more than 30 percent of their pre-tax income.

So the Generation Squeeze study entitled “Straddling the Gap” compares current prices with what price a median-earning 25-to-34-year-old could afford without crossing this threshold.

Analysts sourced full-time, full-year median earnings income data from Statistics Canada for that age group and assumed a downpayment of 20 percent. They also assumed a five-year fixed-rate mortgage.

“Despite recent nominal declines in housing prices compared to previous years, the gap between the cost of owning a home and the ability of younger Canadians to afford it is at critical levels,” says Paul Kershaw, founder of Generation Squeeze and co-author of the report, in a news release.

“If housing markets are levelling out, they remain untenably high,” he continues.

Generation Squeeze includes multiple recommendations to policymakers on how to address housing affordability issues plaguing major Canadian markets.

“[T]he shift toward dual earner households is a key path for many couples to straddle the much greater gap between home prices and earnings,” says Kershaw in an email to Livabl. “However, this coping strategy requires child care and parental leave to no longer cost mortgage-sized payments,” he continues.

Generation Squeeze lists reducing these costs among its affordability-improving recommendations.

Others include policy targets that seek to keep home-price increases in line with incomes, as well as a new phase of the federal government’s National Housing Strategy that widens the plan’s focus beyond social housing.

“In the lead-up to the fall election, we need all parties to commit to bold action that builds on some of the progress we’ve seen emerge in the past couple of years,” Kershaw says in the news release.

Canadian Home Prices Need to Fall by $223,000 to be Affordable for Millennials by Josh Sherman | Livabl