Financial gifts Canadians receive from their parents for a house purchase are getting larger, and here’s why

Sharply growing real estate prices in many regions of Canada mean parents have to help their children purchase homes with gifts that are becoming larger.

According to CIBC deputy chief economist Benjamin Tal, almost 30% of home buyers received help from relatives over the previous year, marking a 10% increase from 2015. Moreover, the number keeps going up.

Housing prices and sales showed a significant increase during the pandemic as mortgage rates went down and people who worked from home searched for larger properties. The number of buyers receiving help from their parents remained unchanged, but the sums went up, Tal noted.

“In 2015, the gift size exceeded $52,000 slightly, but it has been growing steadily since then,” – said Tal.

“Nevertheless, while the share of gift receivers remained unchanged during the pandemic, the average gift amount went up to a record high of $82,000.”

Another interesting finding is that not only first-time buyers received financial help from their parents. Almost 9% of move-up buyers also got help. Although the share of this category getting gifts is falling, the size of the gifts has reached $128,000.

Some areas showed larger home prices gains, and the gifts there were also up.

“For instance, the average gift in Toronto during the first 3 quarters of this year now exceeds $130,000 for first-time buyers, and almost reaches $200,000 for mover-uppers. In case of Vancouver, the numbers rose to $180,000 and $340,000 respectively,” – noted Tal.

According to Tal’s estimates, $10 billion was gifted during the previous year, which accounts for 10% of the total down payments. In his opinion, gift money and home prices are tightly connected.

“The average amount of a gift depends strongly on the home prices. In fact, during the previous 5 years, growth in the average size of gift exceeded home price inflation, reaching 9.7% per year. It’s 2% faster than home prices increase,” – Tal added.

He says a large part of the gift money came from parents’ savings.