Vancouver parents giving kids $180K on average to buy first home, report finds
Parents are coughing up an average of $180,000 to help their adult children enter the Vancouver real estate market, according to a new report highlighting the widening wealth gap in Canada.
The CIBC report found approximately 30 per cent of first-time homebuyers across the country are relying on the Bank of Mom and Dad to afford their down payment, receiving an average gift of $82,000 during the first three quarters of 2021 – less than half of what Vancouver parents are apparently spending on their children.
Even Toronto parents are spending significantly less than their Vancouver counterparts, gifting an average of $130,000 to their offspring, according to the report.
Vancouver realtor Kate MacPhail with Stilhavn Real Estate Services told CTV News more than half of the first-time homebuyers she works with get help from their parents. She said parental support can also be a deciding factor when buyers find themselves in a bidding war for a particular property.
"If we need to go over and above what they had initially planned on spending, then oftentimes the parents will help out to get them up to that level," said MacPhail.
And it's not just younger homebuyers in their 20s and 30s needing help from their family. MacPhail said she's worked with first-time buyers in their 40s who require their parents' support to enter the market.
Parental gifts get even bigger for existing homeowners looking to upgrade, according to the CIBC report. Those buyers received an average of $104,000 across the country during the first three quarters of the year, $200,000 in Toronto and a whopping $340,000 in Vancouver.
MacPhail, who has worked in real estate for 11 years, said these kinds of gifts have become much more common – and necessary – over the years as rents and real estate prices have increased.
"It's really unusual for somebody to have saved $100,000 or $200,000 by the time that they're in their 30s just by working and saving," she said. "Most of my clients are already paying $2,500 a month or more in rent. Some of them who have kids are paying $4,000 a month for a three-bedroom, so being able to save on top of that is almost impossible for most people."
CIBC estimates that such gifts totalled upwards of $10 billion this year, accounting for 10 per cent of down payments across the country.
Report author Benjamin Tal, deputy chief economist of CIBC World Markets, noted the trend widens the wealth gap between potential homebuyers who benefit from financial assistance from their parents and those who do not.
“That increase in the gap is much larger than the actual gift size as it might make the difference between owning and not-owning a house, with receivers potentially benefiting from future home price appreciation,” he wrote, adding that smaller mortgages also lead to significant interest payment savings over time.
MacPhail said she tries to find creative ways to help clients without parental help enter the market, such as borrowing from their RRSP to purchase a starter home well within their means and then upgrading a few years down the line.
"I can get them into a one-bedroom condo under $525,000 just taking that money out of their RRSP," she said. "Five years after that, with today's mortgage rates, they've probably paid down $80,000 on the principal … that puts them in a position to put over $100,000 down on their next home."
With files from CTVNews.ca's Solarina Ho
CTVNews.ca Top Stories
Millions of Canadians have been exposed to potentially toxic chemicals, and they're not going anywhere
For decades, North Bay, Ontario's water supply has harboured chemicals associated with liver and developmental issues, cancer and complications with pregnancy. It's far from the only city with that problem.
opinion How to use your credit card as a powerful wealth-building tool
Irresponsibly using a credit card can land you in financial trouble, but personal finance columnist Christopher Liew says when used properly, it can be a powerful wealth-building tool that can help grow your credit profile and create new opportunities.
WATCH Dashcam video shows terrifying near-miss on two-lane northern Ontario highway
There were some scary moments for several people on a northern Ontario highway caught on video Thursday after a chain reaction following a truck fire.
Which Canadian cities have the highest and lowest grocery prices?
Where you live plays a big factor in what you pay at the grocery store. And while it's no secret the same item may have a different price depending on the store, city or province, we wanted to see just how big the differences are, and why.
Here's what 'the hinge' move is, how to do it correctly
When you're picking something up from the floor or bending over to tie your shoe laces, you're performing "the hinge move," according to movement trainers.
Tips to make a house or apartment safe and accessible for older adults living at home
Here's a summary of tips from the U.S. National Institute on Aging and AARP, which offers a free room-by-room guide with practical suggestions for older adults living independently.
Average hourly wage in Canada now $34.95: StatCan
Average hourly wages among Canadian employees rose to $34.95 on a year-over-year basis in April, a 4.7 per cent increase, according to a Statistics Canada report released Friday morning.
'I may have some nightmares:' Man survives being bitten by 2 sharks in Bahamas
A man who was bitten by two sharks in the Bahamas said Thursday he's 'thankful that I'm here' while sharing his story of survival.
Barron Trump declines to serve as an RNC delegate
Former U.S. President Donald Trump's youngest son, Barron Trump, has declined to serve as a delegate at this summer’s Republican National Convention, according to a senior Trump campaign adviser and a statement from Melania Trump's office.