Toronto real estate agent Danielle Demerino here. I am sure we can all agree that this pandemic has created an insane real estate market. We have seen inventory drop to two weeks worth (which means if no more homes went on the market today we would sell out in two weeks). We’ve seen homes sell for not only hundreds of thousands over asking, but millions over asking. We witnessed condos hit an all time low and recover what felt like over night. We watched the suburbs fill up and cottages fly off the shelves. It’s safe to say that it’s been a difficult ride for anyone trying to purchase real estate and a not so difficult ride for the sellers. It’s been so difficult for buyers that CIBC has estimated that in 2021, parents gifted an estimated 10 billion dollars to their adult children looking to purchase a home.
As the Canadian housing prices continue to rise and hit unaffordable levels, parents are coming to the rescue by giving their grown up children record amounts of money. A CIBC report found that approximately 9% of existing homeowners and 30% of first-time homebuyers received some form of financial assisted from family in 2021. CIBC data recorded that the average gift size for first-time home buyers was $82,000 and an unbelievable $128,000 to existing homeowners as of September 2021.
These numbers seem crazy but I have seen many cases to back up these numbers. The difference of $82,000 for a first-time home buyer could mean simply getting in the market or not. The difference of $128,000 could mean moving from a town home to a detached home. I had one particular friend who was downsizing after a divorce and planned to move from a 6 bedroom home with her two kids to a small 3 bedroom middle townhouse. After nearly pulling the trigger, her parents gifted her $150,000 which meant she was able to get a 4 bedroom, detached home that suited her and her kids much better. The crazy thing is, the budget she had to work with should have been more than enough to get the detached home to begin with.
When we look back to 2015, approximately 20% of first-time homebuyers were gifted on average $52,000 in aid from family. The pandemic showed steady numbers among first-time buyers; however, the total monies given by family since 2015 has gone up and down with the housing price fluctuations but outpaced the price of inflation in homes by 2% per year.
Reports have shown that the majority of this gifted money is from parents’ savings, which means most people aren’t going into debt to help their children in purchasing. The pandemic was a tough time for some but also lead to savings for many. The gift of money towards real estate has somewhat assisted in narrowing the wealth gap among parents but created more inequality between those who received financial help from their parents and those who did not. The financial gifts can mean so much more than just money. It can mean the difference of owning a home or not.
When viewing markets like Vancouver and Toronto, the gift size was even higher. First-time home buyers in Toronto received an estimated $130,000 from January to September of 2021 and a WHOPPING $200,000 to existing homeowners. The numbers were even higher in Vancouver at quarters of 2021, and $200,000 among non-first timers. In Vancouver, those gifts were an eye-popping $180,000 and $340,000 respectively.
So what does this trend mean you might ask? The gift of money in the form of homeownership has become a huge factor impacting the demand on real estate and ultimately the price of homeownership across Canada.
As usual, if you or anyone you know needs some real estate advice, I would love to hear from you. Give me a call, shoot me a text or fill out a form on my website. I would love to be part of your real estate journey and help you achieve your goals!
