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
Doctors ask Liberal government to reconsider capital gains tax change
The Canadian Medical Association is asking the federal government to reconsider its proposed changes to capital gains taxation, arguing it will affect doctors' retirement savings.
Keeping these exotic pets is 'cruel' and 'dangerous,' Canadian animal advocates say
Canadian pet owners are finding companionship beyond dogs and cats. Tigers, alligators, scorpions and tarantulas are among some of the exotic pets they are keeping in private homes, which pose risks to public safety and animal welfare, advocates say.
Prince William and wife Kate thank public for birthday messages for son Louis
Prince William and his wife Kate thanked the public for their messages which had been sent to mark the sixth birthday of their youngest son Louis on Tuesday.
She was the closest she'd ever been to meeting her biological father. Then life dealt her a blow
Anne Marie Cavner was the closest she'd ever been to meeting her biological father, but then life dealt her a blow. From an unexpected loss to a host of new relationships, a DNA test changed her life, and she doesn't regret a thing.
How quietly promised law changes in the 2024 federal budget could impact your day-to-day life
The 2024 federal budget released last week includes numerous big spending promises that have garnered headlines. But, tucked into the 416-page document are also series of smaller items, such as promising to amend the law regarding infant formula and to force banks to label government rebates, that you may have missed.
Which foods have the most plastics? You may be surprised
'How much plastic will you have for dinner, sir? And you, ma'am?' While that may seem like a line from a satirical skit on Saturday Night Live, research is showing it's much too close to reality.
'Catch-and-kill' strategy to be a focus as testimony resumes in Trump hush money case
A veteran tabloid publisher was expected to return to the witness stand Tuesday in Donald Trump's historic hush money trial.
Quebec farmers have been protesting since December. Is anyone listening?
Upset about high interest rates, growing paperwork and heavy regulatory burdens, protesting farmers have become a familiar sight across Quebec since December.
South Korean sentenced to 14 months in jail for killing 76 cats
South Korean man has been sentenced to 14 months in prison for killing 76 cats in one of the country's most gruesome cases of animal cruelty in recent years.