More First-Time Buyers Turning to Parents for Down Payment: Survey

New mortgage qualification rules have pushed up number of buyers needing financial help, but are not putting them off buying, according to BC notaries

By
REW.ca
January 6, 2017






Family financial help down payment

Increasing numbers of first-time home buyers in BC are turning to their parents for a financial gift or loan in order to raise their down payments, according to a recent survey of notaries conducted by The Society of Notaries Public of BC.

In a survey carried out at the end of 2016 and published January 4, 72 per cent of responding notaries across BC, and 71 per cent in Greater Vancouver, said that their first-timer clients were typically getting help with their down payment. This compares with 57 per cent of notaries saying the same thing in 2015, and 49 per cent in Greater Vancouver.

First time buyer down payments notaries

Increasing home prices across the province do not seem to have deterred first-time buyers getting into the market, according to the survey. Some 84 per cent of responding notaries said they saw either the same level of activity or an increase in the number of first-time home buyers getting into the market in 2016.

Rather than being directly related to a rise in home prices, 65 per cent of notaries said the increased in getting help from family was generally due to buyers wanting to raise bigger down payments to avoid having to qualify under the new CMHC “stress test” rules, introduced in October 2016. The new mortgage qualification rules require that anyone with a down payment of less than 20 per cent are required to income-qualify under higher posted interest rates, which can dramatically reduce their buying power.

In the majority of cases, BC notaries said that parents are giving their children money for a down payment as a gift, rather than a loan or in return for an interest in the property.

“Many parents who can afford to provide financial support to their children for buying a first home are doing so,” said Akash Sablok, a notary in Vancouver. “They see it as an important step for their adult children, and this kind of parental support is increasing as house prices increase.”

Just over half (51 per cent) of BC notaries said that, typically, more than 25 per cent of a first-timer’s down payment will come from someone else, with 15 per cent saying than they typically see more than 50 per cent of the money coming from someone else. The remaining 49 per cent said that they see anywhere up to 25 per cent of the money being gifted or loaned.


Joannah Connolly is the editor and content manager of REW.ca and Real Estate Weekly newspaper, and editor-in-chief of Western Investor and West Coast Condominium. She also moonlights as the host of the Real Estate Therapist call-in show on Roundhouse Radio 98.3FM every Saturday, 9-10am. A dual Canadian-British citizen, Joannah has 20 years of media experience in Vancouver and London, with a background in construction, architecture and business media. Like many of the residents of her newly adopted town, Joannah has a decidedly unhealthy passion for Vancouver real estate and is often to be found scouring property listings well above her pay grade.
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