Down payment gifting. Some may ask, what’s that? Let’s elaborate.

So you want to buy a house.

But – you’re fresh out of school, just started a new job or about to get married.  Funds are limited and house prices in the GTA are soaring.

What to do?

Well, if you’re among the fortunate adult children to have generous parents + savings – you knock on the door of mom and dad.

The latest out of CIBC Economics report, by Benjamin Tal, is that in the last year, parents attributed to more than $10 billion dollars in down payment gifting to their kids to buy houses.

“Overall we estimate that over the past year, gifting amounted to just over $10 billion, accounting for 10% of total down payments in the market as a whole during that period.”

• Benjamin Tal, CIBC Chief Economict

Just how much downpayment gifting went on? Scroll down for more details below:

Presents for First Time Home Buyers & Mover Uppers

Of those new buyers entering the housing market for the first time, just under 30% of them received down payment gifting in order to close the deal.

This is nothing new, however a substantial increase from the 20% of them that received a down payment gift in 2015.

Mover Uppers, considered people scaling up from their existing home and into a bigger one or better neighbourhood, also benefitted.  Approximately 9% of this group utilized down payment gifting from their parents in order to make the move.

Gifting Amount Moves Up with Home Prices

Taking into consideration that the average detached home price in the GTA has grown to just over $1.1 million, the amount of down payment gifting dollars that has gone up should come as no surprise.

In 2015, the average parental gift in Canada was $52,000.

In 2021, the average parental gift in Canada is $82,000.

That’s an annual pace increase of 9.7% , outpacing home price inflation by two whole points.  Wow.

That’s across Canada though, and as we know, prices vary greatly province to province.  The average down payment gift in Toronto is actually closer to $130,000 for first time home buyers and up to $200,000 for mover uppers. WOW.

Where’s the Money Coming From?

Most would assume that parents are going into substantial debt by helping their young with down payment gifting.  However, as per the CIBC report, it is not the case!

“Based on Equifax information, we estimate that only 5.5% of gifting parents use debt to finance gifting.”

The highest share of parents that assist, come from Vancouver & Toronto, where home prices have steadily climbed year over year and where their savings have naturally ballooned as well.  Thus the large increases in gift amounts and the portion of dollars gifted from parents can largely be attributed to the pandemic’s real estate boom.

The number of parents co-signing for mortgages has also increased to 45% compared to before the pandemic.

If you’re curious about your own children’s future housing, let’s talk real estate investing opportunities that can help set you and them up for success.  Abode Realty has numerous strategies and a network of mortgage specialists to help you work through it all.

Send us an email today to set up a one on one, hassle free, no obligation call and satisfy that curiosity!