TORONTO (CU)_Like in many developed countries across the globe, Canada has also been encountering a housing crisis over the past year, as home prices surged to new heights. With the pandemic-induced lockdowns forcing millions of people to work from home, the demand for bigger living spaces saw a significant increase amid the global health crisis. This, together with low interest rates and several other factors triggered a record-setting frenzy earlier this year, forcing more people to rely on their parents’ money to buy their first home.
According to recent figures published by the Canadian Imperial Bank of Commerce (CIBC) shows that the so-called Bank of Mom and Dad has had to support nearly one-third of first-time home buyers, gifting a record $82,000 on average, a significant increase from 2015, when this figure was at $52,000. The situation was rather critical in Canada’s red hot markets like Toronto and Vancouver, where the average gift exceeding $130,000 and $180,000 respectively.
“No less than two-thirds of first-time buyers that received a gift indicated that the gift was the primary source of their down payment,” CIBC’s deputy chief economist, Benjamin Tal, wrote in a report for clients Monday (October 25).
He further noted considering how the parents have sourced these funds, it appears that a majority of these parents are not taking more debt. “Therefore, it seems that a large portion of the gifting comes from parents’ savings, which of course grew notably during the pandemic—allowing for the increases in the size of the average gift,” he said.
According to the CIBC executive, the phenomenon is not limited to first-time homebuyers, since those who already own a home but is looking to buy a larger house are also relying on the support of their parents. “Overall we estimate that over the past year, gifting amounted to just over $10 billion, accounting for 10 per cent of total down payments in the market as a whole during that period,” Tal said.
