Are you a Canadian having a hard time buying your first home? Have you tried getting wealthier parents? CIBC crunched its numbers and found the role of parental wealth is playing a more important role for both first-time buyers and “mover uppers.” Canadian real estate has become so unaffordable that now a third of first-time homebuyers require a 6-figure gift from their parents—up considerably from just a few years ago.
A Third of Canadian First-Time Home Buyers Require Parental Wealth
Canadian first-time buyers require a little, okay—a lottle help from friends and family. Nearly a third (31%) of first-time buyers needed a gift to help buy a home in the bank’s 2024 YTD data. That’s up from 20% back in 2015, which seemed high back then.
Canadian First-Time Homebuyers Increasingly Require Parental Help
Source: CIBC.
The amount of money gifted has also seen a sharp increase. The average gift this year was a whopping $115,000, up 73% since 2019—right before the cuts. One would expect the amount of the gift to increase, but the amount as well as the share of buyers requiring parental help? That’s a compounding problem that becomes much harder to fix.
Even Canadians Upgrading Their Home Need Parental Help
Relying on parental wealth to secure a home isn’t just the domain of first-time buyers. CIBC found that those upgrading their homes increasingly rely on parental wealth too.
Canadians Moving Up The Property Ladder Need Parental Help Too
Source: CIBC.
The share of homebuyers upgrading their home with a parental gift climbed to 12% of purchases in 2024. That’s up 3 points from 2015, and as you might have guessed—those gifts got a lot larger too. The average gift reached $167k, rising 97% since 2019. Yowza.
Homebuyers In BC & Ontario Need A Lot More Help
First-time buyers in BC and Ontario were even more dependent in these pricey provinces. The share that used a gift was roughly 36% in both provinces, 5-points higher than national data. The average gift’s dollar value was also significantly more expensive in BC ($204k), and Ontario ($128k).
First-Time Buyers In BC and Ontario Need Much Wealthier Parents
Source: CIBC.
As one might guess, those purchasing an upgrade also required a hefty gift. The share of buyers upgrading with a gift was roughly the same as the national rate in both provinces. However, the average gift was significantly higher in both BC ($230k) and Ontario ($189k).
“Homebuyers relying on a wealth transfer from their parents in order to purchase a home is becoming the norm in Canada,” explained Benjamin Tal, deputy chief economist at CIBC World Markets, and the co-author of the report.
He adds, “… this phenomenon is helping to mitigate the bite of housing inflation for buyers, but unfortunately it is also contributing to a widening of the already wide wealth gap in Canada.”
It may just be a sign of the times, even the country’s finance minister required parental help to purchase their home, but it’s a problematic shift for young adults. Homeownership is the largest source of Middle Class wealth in the country, and it’s increasingly determined by parental wealth. Since most immigrants are looking for class mobility, it’s a big shift to the country’s value proposition. Moving to Canada will be increasingly seen as a lateral shift if this continues, while developing economies become advanced ones.
Let me guess. The “gifts” are delivered in bundles of cash in a grocery bag to casinos, which are then processed into cashier cheques?
People need to stop targeting the rich. So what if wealthy families have a little extra to help their kids? Work harder and your kids get the same advantage.
I don’t think this is hating on the rich. I think the point is if a third of people are doing it, it’s not just the rich. That’s way too many “rich” people, it’s the Middle Class.
It’s all laid out for you in the article, just think about it.
– The Middle Classes primary source of wealth is their home.
– Too many people lending their kids money for it to just be the “rich”
– the amount is increasing with homes, but slower… potentially as rates increased.
Aren’t there rules prohibiting borrowing HELOCs to use as a downpayment?
Is there any way to verify if the money is from a HELOC? It’s been a while but I don’t recall them asking where my parents got the money from when I bought, and when I took out a HELOC they only had a questionnaire. No verification or anything.
There’s also the issue it’s not just HELOCs but equity withdrawals via refinancing. I only recall Betterdwelling being the only place that published those at any point, and only seen it once but it was pretty eye opening how much of the current mortgage debt is owners that withdrew the appreciation vs new loans where a buyer needs financing.
They could ask for proof of deposits, but there’s no one incentivized to all that extra work. Rather they’re incentivized to the contrary.
AFAIK one strategy has been to have the deposit in account >90 days then one is good to go.
tbh I don’t think I could have bought my home in this environment. I already find it burdensome that property taxes are rising so sharply, even though it’s a relatively “low” rate to American cities. It would be the same amount but a much higher rate if prices fell.
The solution to high prices is high prices.
These down payment gifts will be immolated equity when mean reversion hits.
My Cousin lives in Vancouver. Back in 1995 her/husband received financial gift from direct relatives to sum of $250k, as did most of her girl friends. I sure hope they help there children out, as they received financial help.
PB43
I think the purpose of such articles is to instill a trend – new parental obligation: help grownup children with buying a house. And even the amount is suggested. So this kind of help will gradually be expected and hopefully demanded. “Everybody is doing it – why not you!”
It’s called mortgage fraud you get a line of credit from a private lender then use it to buy a home without telling the bank they don’t check and you have a house. Then when the house goes up in value by double you pay everyone off