Family financial help remains vital for Canadian homebuyers, with gift amounts rising despite cooling markets
In 2021, as the COVID-19 pandemic influenced all aspects of life and the real estate market surged, a study explored the trend of gifting towards down payments.
Recent data from CIBC indicates that this trend continues, with financial assistance from family members remaining a crucial source of down payments.
The data reveals that 31 percent of first-time homebuyers received financial help from family members, a significant increase from 20 percent in 2015.
Although the percentage has plateaued recently, the average gift amount has continued to rise, even as home prices have decreased from their pandemic peaks. Currently, the average gift amount for first-time homebuyers is $115,000, marking a 73 percent increase from 2019 levels.
Mover-uppers, or those purchasing larger homes, also benefit from family gifts, though to a lesser extent. About 12 percent of mover-uppers use gifted funds, with the average gift amounting to $167,000.
This is higher than the average gift for first-time buyers, reflecting the typically higher cost of larger homes.
There is a strong correlation between gift amounts and home prices. Despite a 14 percent decrease in benchmark home prices since their pandemic peak, prices remain 33 percent above pre-COVID levels.
Consequently, gift amounts have increased faster than home prices during this period. This rise in gift sizes is likely facilitated by parents downsizing and capitalizing on high home prices from selling their principal residences.
Ontario and British Columbia (BC) exhibit a higher reliance on gifts for first-time home purchases due to their high home prices. In these provinces, 36 percent of first-time buyers receive gifts, compared to the national average of 31 percent.
The average gift in BC is $204,000, significantly higher than Ontario's average of $128,000. Since 2019, gift amounts in BC have increased by 90 percent, exceeding the national average increase of 73 percent, while Ontario has seen a 52 percent rise.
For mover-uppers, the likelihood of receiving a gift in Ontario and BC aligns with the national average of 12 percent. However, the average gift amounts are higher in these provinces, with Ontario at $189,000 and BC at $230,000, compared to the national average of $167,000.
Nationally, the increase in gift amounts for mover-uppers since 2019 is 97 percent, with BC seeing a 46 percent rise and Ontario experiencing a 93 percent increase.
This phenomenon helps mitigate the impact of housing inflation for buyers but also contributes to widening the wealth gap in Canada. As housing affordability remains a critical issue, financial gifts from family members continue to play a significant role in enabling home purchases.
