Gifts from parents to buy homes are the largest in Toronto and Vancouver (REUTERS)
Soaring home prices in many parts of Canada mean parents are helping their children buy homes with gifts that are getting bigger.
CIBC deputy chief economist Benjamin Tal, says nearly 30 per cent of of home buyers got help from family members during the past year. That’s up from 20 per cent in 2015 and has been rising steadily.
Home prices and sales exploded during the pandemic as mortgage rates fell and people working from home sought out more space. The share of buyers getting help from parents didn’t go up, but Tal says the amounts did.
“As for the size of the gift, in 2015 it stood at just over $52,000 and has risen steadily since then,” said Tal in a report.
“Note, however, that while the share of gift receivers did not rise during the pandemic, the average gift has risen notably to reach a record high of $82,000.”
First-time buyers trying to get onto the property ladder aren’t the only ones turning to the ‘bank of mom and dad’. Tal says just under nine per cent of move-up buyers got help. While the share of this type of buyer getting gifts is going down, the size of the gifts has ballooned to $128,000.
Also See: The latest real estate news for housing prices, mortgage rates, markets, luxury properties and more at Yahoo Finance Canada.
Home prices and gift money go hand in hand
Prices have gone up more in some parts of the country than others, where gifts are even larger.
“The average gift in Toronto during the first 3 quarters of 2021 is now estimated at more than $130,000 for first-time buyers while mover-uppers enjoyed a gift of almost $200,000. In Vancouver, those gifts are even larger, averaging $180,000 and $340,000 respectively,” said Tal.
Tal estimates $10 billion was gifted over the past year, accounting for 10 per cent of the total down payments. He also says gift money and home prices are closely connected.
“The average size of a gift is highly correlated with home prices. In fact, over the past half a decade, growth in the average size of gift outpaced home price inflation, averaging 9.7% per year—a full two percentage points faster than growth in home prices,” said Tal.
Tal says a big chunk of the gift money seems to be coming from parents’ savings.
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.
Download the Yahoo Finance app, available for Apple and Android.