Would You Like a Down Payment for Christmas?

Third of baby-boomers giving adult children “living inheritances” for home purchases, finds survey
Joannah Connolly
December 5, 2017

Having enjoyed unprecedented rises in the values of their homes recently, one in three Canadian baby-boomers (ages 52-71) in the four largest cities are helping their adult children buy a home by gifting a large sum towards their down payment, according to a survey released December 5.

The survey of more than 2,000 boomers in Vancouver, Toronto, Calgary and Montreal, by the Mustel Group on behalf of Sotheby’s International Realty Canada, found that intergenerational wealth transfer is fuelling the home purchases of many Millennial children.

One-third of respondents said that they either have given, or plan to give, a “living inheritance” to enable their adult children to get into the real estate market. Calgary respondents were the most likely to do so, at 41%, followed by Vancouver boomers at 36% and Torontonians at 35%.

Two in three “living inheritance” givers of real estate funds said there was or will be a specific trigger that prompts their gift – most likely to be the sale of their financial investments, cited by 21%, and the sale of their primary home, cited by 17%.

The survey pointed out that income inequality is also transferring from one generation to the next. Sotheby’s reported that respondents with annual household incomes of over $100,000 were almost twice as likely to give money to help their children buy real estate: 49% said they plan to or have done so, compared with 27% of those with household incomes below $100,000.  

The median “living inheritance” given by those with household incomes under $100,000 is approximately $25,000, with 72% of living inheritances falling under $50,000. But for boomers earning more than $100K a year, only 53% of their “living inheritances” were under $50,000; 25% were $50,000-$100,000, 10% were $100,000-$200,000, 10% $200,000-$500,000, and the remainder over $500,000.

The report said that funds gifted by urban boomers for real estate purchases are largely used by recipients to buy their first home as a primary residence (rather than an investment or vacation property). Nationally, 82% indicated their gift would be used for a first home, rising to 90% in Vancouver, followed by Calgary, Toronto and Montreal at 86%, 83% and 74% respectively.

Overall, 44% of “living inheritance” givers believe that their recipient(s) would not have been or will not be able to make their home purchase without their gift.

Brad Henderson, President and CEO of Sotheby’s International Realty Canada, said, “Baby boomers affect the Canadian real estate market on multiple levels: as direct consumers who drive housing demand and product mix, as arbiters of market confidence, and as indirect influencers through their financial support of next generation home buyers. Anecdotally, we have known that funds from the ‘Bank of Mom and Dad’ have been flowing into the market – this new report sheds light onto some of the critical details.”

The report follows news last week that the CREA is calling for changes to the Home Buyer’s Plan to allow for the transfer of funds from parents’ RRSPs to their adult children in order to help them buy real estate.

 

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Joannah Connolly
Joannah Connolly is editorial director of Glacier Real Estate, Glacier Media's real estate division. Joannah writes and curates real estate news for Glacier Media's local newspaper websites, including the Vancouver Courier, North Shore News, Burnaby Now, Tri-City News and others. She also oversees editorial content in Real Estate Weekly Homes, West Coast Condo, Western Investor and Glacier's special real estate publications. A dual Canadian-British citizen, Joannah has 22 years of journalism and editing experience in Vancouver and London, with a background in construction, architecture, healthcare and business media. Joannah has appeared on major local TV outlets as a real estate commentator, has moderated and spoken on various industry panels, and spent two years hosting the Real Estate Therapist radio show on Roundhouse Radio.