People walk past real estate properties in Toronto, on July 12, 2023. A CIBC analysis shows that 31 per cent of recent first-time homebuyers this year have received a gift for their down payment, up from 20 per cent in 2015.Christopher Katsarov/The Globe and Mail
Family gifts to provide or enhance a down payment have kept getting larger and more common among young homebuyers, according to a new analysis by Canadian Imperial Bank of Commerce.
The study, which represents an update from a 2021 report, found that nearly a third of first-time buyers now rely on such financial aid, with the size of their average parental cash injection now past the six-figure mark. And a growing share of existing homeowners are also tapping their parents’ purse to be able to upsize to a larger property, the study shows.
“Homebuyers relying on a wealth transfer from their parents in order to purchase a home is becoming the norm in Canada,” report authors Benjamin Tal and Katherine Judge wrote.
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The numbers show that 31 per cent of recent first-time homebuyers this year have received a gift for their down payment, up from 20 per cent in 2015. The average amount of the financial aid has also soared, reaching $115,000, 73 per cent above 2019 levels, the authors note.
In British Columbia, the average down payment gift sits slightly above $200,000, a 90-per-cent increase since 2019. In Ontario, the other province with the worst housing affordability, the average gift is now $128,000, up 52 per cent from five years ago. In both jurisdictions 36 per cent of recent first-time buyers had gifted funds.
Their analysis is based on data from mortgage applications at CIBC, which include a questionnaire that asks borrowers to specify the source of their down payment funds, Mr. Tal said in an interview.
Among upsizing homeowners, 12 per cent had family financial help, a share that has ebbed and flowed in the past 10 years but stood at around 9 per cent in 2015. Among this group, the parental donations averaged $167,000 nationally, $189,000 in Ontario and $230,000 in B.C.
Those figures reflect only amounts used to buy the larger property, but it’s likely many “mover-uppers,” as the report calls them, are double-dipping into the parental pursue and also received help to buy their first home, Mr. Tal said.
In general, ever-larger and more prevalent down payment gifts are a symptom of just how out of reach home ownership is for many young people, he added.
“A generation of Canadians can only dream about owning a house without their parents, in many cases.”
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And gift amounts have continued to increase despite recent declines in home prices in many parts of the country, the analysis shows. Mr. Tal attributes that in part to interest rates, which likely forced many mortgage shoppers to pad their down payments in order to keep monthly payments manageable.
But the phenomenon likely also reflects the impact of soaring residential real estate prices during the earlier stages of the pandemic, which buoyed the wealth of the older homeowners who are now largely providing the down-payment help, Mr. Tal said.
Decisions to downsize among this older generation likely freed up cash that helped fuel the king-sized financial gifts, according to the report.
The trend means well-off families have been able to mitigate the effects of the country’s housing affordability crisis on their adult children, Mr. Tal said. But that has come at a cost, he added.
“This trend, although helping many young Canadians, which is a good thing, is also, unfortunately, widening the already large and wide wealth gap in Canada – and that’s clearly suboptimal,” he said.
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