Canada

Over 1 In 7 First-Time Homebuyers Are Tapping The Bank of Mom and Dad

The bank of mom and day may be undergoing an aggressive expansion. Teranet, Canada’s largest land registry operator, conducted an analysis on ownership in Ontario. First-time buyers scoring a place on their own is on the slide. Most aggressively taking its place, is buying with a second owner at least 20 years older. The firm believes this may confirm what you already know – more people need help from mom and dad.

Fewer Homes Have One Owner On The Title

Higher prices mean fewer first-time buyers are pursuing homeownership alone. The rate of condo apartments with only one person on title was 57.1% in 2012, and fell to 48.4% by 2018. For all home types (the general market), the rate fell from 40.2% to 33.9% over the same period. Double income households? Shocking… not. What is interesting is who they’re buying with.

First-Time Condo Homebuyers in Ontario

The rate of titles with multiple owners, and age gap (if present), for first-time, condo apartment buyers in Ontario.

Source: Teranet, Better Dwelling.

Buying With A Partner is On The Rise

First-time buyers with at least one other owner on title, with a less than 20 year age gap, saw a modest increase. In 2012, 33.4% of condo titles had several owners on title, within 20 years of each other. By 2018, that number jumped to 37.1% – an increase of 11.07% over six years. The total for all segments of housing went from 50.1% to 51.6% over the same period. Buying with peers is a little more popular – whether with a spouse or pursuing co-ownership.

First-Time Non-Condo Homebuyers in Ontario

The rate of titles with multiple owners, and age gap (if present), for first-time, non-condo apartment buyers in Ontario.

Source: Teranet, Better Dwelling.

Bank of Mom and Dad To The Rescue

What about the rest? Well, more people are also turning to the bank of mom and dad, or at least finding a sugar parent. First-time buyers with at least one person 20 years older made the biggest change. Condo apartments, with at least one other owner 20 years or older, jumped from 9% in 2012 to 14.4% of titles by 2018. Total homeownership saw a similar trend, rising from 9.6% to 14.5% over the same period. The rise of intergenerational wealth to secure ownership is a big issue to watch.

First-Time Homebuyers in Ontario

The rate of titles with multiple owners, and age gap (if present), for all first-time homebuyers in Ontario.

Source: Teranet, Better Dwelling.

First-time homeowners are becoming increasingly dependent on intergenerational wealth. Some might argue it’s not an issue if parents want to help, but they’re overlooking a bigger problem. If parental help becomes the norm, a single asset class becomes heavily concentrated. This makes already highly indebted households, more vulnerable to long-term consequences in the event of shock.

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20 Comments

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  • Trevor 1 month ago

    The leverage in the US led to losses of one trillion for the banks. Obviously the government won’t let a loss that substantial hit Canada, since we don’t have another industry to rely on. Where do you think the money is going to come from to mitigate the issue? Or do we think people can owe 180% of their income for life. lol.

    • Ace 1 month ago

      I’ve been wondering the same thing! Are people really planning to pay off these giant mortgages and debts before they retire? Or perhaps they aren’t planning on retiring. Canadians have been using house equity to keep the economy flowing and a nice pace for years now. How long can the cycle last?

    • Another Trevor 1 month ago

      There’s no plan on how to deal with it. Deflation and bankruptcy are probably how most of it will shake out, and people’s cost of living will decrease. That’s good, it frees up capital for investment in profitable business instead of housing. It’s going to be painful though

      • Jin 1 month ago

        I tend to agree. Weakness in currency, then we’ll have to import inflation as a cross currency fluctuation. Just in time for the bank of Canada to raise inflation targets in 2020. Coincidently, that’s the year the BOC governor was given an extension until, and the year the CMHC governor’s term was extended to.

    • Bluetheimpala 1 month ago

      Yes, people can owe substantially more than they generate because we break everything into payments and do not look at the principal, total cost of ownership or whether the payments are debt only. Think about yield. Take $1M. If you go 20 years, making your interest only payment of $2000k a month, I’ve generated approx $480K and you still owe me most if not all of my kitty. Sure we have to adjust for inflation and blah blah but now I don’t care if the asset has dropped at all PLUS if assets drop, I have the cash to scoop them up. Regardless of how I re-up, I can easily sell the asset below what I paid for it because I’m generating a return. I most likely buy more properties. I think that’s what most people are missing; we’re entering an age of indentured servitude where being ‘well-off’ is less about assets and more so the lack of liabilities. It is apparent that any tom, dick and harry can load up on debt to own an object; if I can buy and sell that same person for pennies on the dollar (not literally of course) because he is desperate and has no other options, now that’s wealth/power/influence. Cash will be the big thing everyone’s going to be talking about over the next decade…or the banks will take a massive haircut and forgive hundres of billions, if not a trillion dollars in debt…hmmmm…BD4L.

  • Jin 1 month ago

    “they’re overlooking a bigger problem.”

    They’re overlooking a bunch of problems actually. One of the bigger issues with having to be dual income reliant is it weighs down the ability for one person to take risks, which is where we get our high performing entrepreneurs from. I’m not talking about two clients and free lancing, or driving an Uber type of self-employment.

    I’m talking about the people that need to take serious capital risks. On average it takes at least a year to build an investible company, IF, you do it right. Load on high costs of living, parental assistance, the fact that one partner can’t support the other effectively, and you have a lot fewer risk takers.

    • Smaug 1 month ago

      Exactly. Whatever your age, whatever your income, your ability to take risks declines as debt increases. That’s why employers tend to prefer employees with mortgages, and often, kids. By necessity, employees with big mortgages and/or dependents are more risk averse, and less likely to be a “flight risk” than those who are free of dependents and mortgage.

      Young people tying themselves down to big mortgages – often aided and abetted by their parents – benefits established employers by ensuring a reliable local supply of obedient little worker bees who are helplessly dependent on their jobs . But long term, the economy suffers as fewer would-be entrepreneurs are able to free up investable capital to start a new venture.

    • Bluetheimpala 1 month ago

      This is a good point and something the economist has commented on in the past. While I agree with the general premise, remember when entrepreneurs flourished and the conditions they were under. Times were shitty and if you wanted to get out of the gutter you had to work hard, sacrifice, pull up your boots and hit the pavement. With crowd funding and the spread of media, I’d argue it is EASIER for entrepreneurs to generate interest and the associated dollars. Imagine, even in the 60s, having to fly all over the US (unless you were already in NY, MA, IL or CA) to get in front of people and build a business. Let alone generating capital! I do think we’re going down the road you mention where entrepreneurship becomes concentrated and tied to income but I don’t believe we’re there yet. Probably 20 years unless something changes. BD4L.

  • Fraser 1 month ago

    I think the next 10 to 20 years will be a rough ride in the housing and stock markets…we are in a bubble globally and everything that goes up, comes down eventually…its starting and will be a slow, painful grind back down…its going to be a messy 10, 15 years…get ready, get out of debt, be smart…it could get real ugly, and fast…Canada is not in good shape at all…its all a lie…governments printing money, more debt (sick), all fake…the recession has begun.

    • Trader Jim 1 month ago

      Wealth managers have been preparing UHNWI clients for these days. In the 80s, there was a shift to using perpetually using interest rates as stimulus, and countries like Canada designed generous offshore income exemptions.

      Throughout the 90s, it became obvious countries were going to use debt to increase the amount of spending younger generations can use,. That would require penalization of fixed income, but they “need” it to make up for the increasing dependency rate. GDP can be made by increasing turnover (an increase in commerce), or by using debt to stimulate. In the 2000s, they started to recommend overseas asset diversification.

      After the Great Recession, and QE started, the great asset shift spread to HNWIs, and so-called advanced economies lowered rates to virtually nothing, to ensure young people could borrow the absolute max.

      The worst part is, they don’t have an out. We increase prints, raise a little, but then never get back to the original point. Perpetually lower we go, with more debt on the horizon.

  • Futurologist 1 month ago

    What if?
    The trend for next 20 years is to distribute wealth from Savers to Poor?
    This is required to keep the social order during disruptive times.
    – By introducing negative rates
    -Punishing bad investments
    -Rewarding poor to borrow for basic needs
    -encouraging most efficient investors (or perceived to be such)

    • Smaug 1 month ago

      You are assuming savers are going to play along. Destroying the incentive to save means no savings. Canada’s pathetic savings rate is barely above 1% of disposable income as it is. You think confiscating that remaining 1% is going to preserve social order? It won’t even pay to keep the lights on.

  • Ace 1 month ago

    This sounds like what’s already been going on the last decade; Low interest rates just as baby boomers are about to retire. Rewarding the poor by increasing their credit card limits every time their credit card becomes half full/ full. As well as offering even lower rates at the bank to allow for lower delinquency rates. Encouraging investors? My bank just gave me a huge line of credit without even asking after I opened a trading account with them. Ha!

  • carlton 1 month ago

    With household debt at 1.80, sooner or later everyone who bought a home recently will declare bankruptcy. After all …. how do you pay back a million when your barely getting by?

  • Rana 1 month ago

    Vancouver home owners will be holding the bag and penniless

  • Louis 1 month ago

    Ask yourselves an honest question. How many people do you know who purchased a house was regretful about it? Even Blue is happy he bought his condo a year ago.

    • Neo 4 weeks ago

      Only people in who Spring 2017 regret it now. Everybody else is oblivious.

    • Ace 4 weeks ago

      My neighbour bought his house for $920k in 2017 ( York Region). He got a divorce this year and wanted to sell. Had the appraiser in who appraised his house for $700k. Other houses in the neighbourhood going for around 600-700k that are better or equal . One went in the mid $500s that was a fixer upper. He regrets his purchase. Anyone who bought in 2016-2017 and are looking to sell are regretting their purchases.

  • Rana 4 weeks ago

    I bought my in 2011 I meant to say who bought during the peak I feel sorry for them

  • Alyssa Havenfeld 4 weeks ago

    Gerald Celente – The Greatest Depression, The Panic is On

    https://www.youtube.com/watch?v=P86QvxKwJo0

    Let the house prices FALL in Toronto please!!!!

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