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.
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.