Rising Housing Costs Force First-Time Buyers to Rely on "Bank of Mom and Dad": CIBC

Rising Housing Costs Force First-Time Buyers to Rely on "Bank of Mom and Dad": CIBC
June 27, 2024

The dream of homeownership, a cornerstone of the Canadian middle class, is becoming increasingly out of reach for many young adults. A recent report by CIBC paints a concerning picture: a growing number of first-time homebuyers are heavily reliant on financial assistance from their parents to enter the housing market.

The Numbers Tell the Story

  • One-third (31%) of first-time homebuyers in 2024 received a significant gift from family members to secure a home. This represents a staggering 55% increase from just 20% in 2015.
  • The financial burden on aspiring homeowners is further underscored by the sharp rise in the average gift value. In 2024, it reached a hefty $115,000, a 73% increase compared to 2019.

Beyond First-Timers

The trend of parental assistance isn't confined to first-time buyers. The report reveals that the share of "move-up" buyers, those looking to upgrade their existing properties, who also received financial gifts from parents, has climbed to 12% in 2024, up from 9% in 2015. The average gift amount for these buyers is even higher, reaching $167,000, a staggering 97% increase since 2019.

Regional Disparity

The burden of rising housing costs is not evenly distributed across Canada. British Columbia and Ontario, notorious for their expensive real estate markets, are particularly impacted.

  • In these provinces, the reliance on parental help is significantly higher, with approximately 36% of first-time buyers receiving a family gift in 2024.  The average value of these gifts is also considerably higher: $204,000 in BC and $128,000 in Ontario.
  • A similar pattern holds for move-up buyers in these provinces. The average gift amounts for these buyers are even more substantial, reaching $230,000 in BC and a staggering $189,000 in Ontario.

Experts Warn

The increasing reliance on parental wealth to achieve homeownership raises serious concerns for the future of Canadian society. Benjamin Tal, deputy chief economist at CIBC World Markets, highlights the potential pitfalls of this trend. He argues that while parental gifts may help some buyers manage housing inflation, they also contribute to a widening wealth gap in Canada.

Homeownership has historically been a significant factor in building middle-class wealth. With parental wealth becoming increasingly crucial for achieving homeownership, upward mobility becomes more challenging, particularly for young adults from lower-income families. This trend also raises concerns about the future of Canada as an attractive destination for immigrants seeking economic opportunity.

Looking Ahead

The current situation necessitates a multi-pronged approach. While Coldwell Banker Horizon Realty remains committed to helping all Canadians achieve their homeownership goals through experienced agents, mortgage pre-approval assistance, and first-time homebuyer programs, broader solutions are needed.

  • Addressing Housing Supply:  A key factor driving affordability issues is a lack of supply in major urban centers.  Policymakers need to focus on measures that incentivize the construction of more affordable housing options.
  • Supporting First-Time Buyers:  Government initiatives aimed at first-time homebuyers, such as the First-Time Home Buyer Incentive (FTHBI), can help bridge the affordability gap. However, ensuring these programs are accessible and effective remains crucial.
  • Promoting Financial Literacy: Equipping young adults with the knowledge and tools to manage their finances effectively can help them navigate the complex housing market.

By acknowledging the challenges and working towards solutions, we can ensure that the dream of homeownership remains a reality for all Canadians, not just those fortunate enough to have the "Bank of Mom and Dad" behind them.

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