More than one-third of first-time homebuyers in Ontario are getting help with their down payment and the average gift now tops $100,000, according to a report from CIBC.
In a report released on Tuesday, CIBC economists Benjamin Tal and Katherine Judge said that approximately 36 per cent of first time homebuyers in the province are using gifts to cover all or a potion of their down payments.
That is five per cent more than the national average and represents a jump from a similar study in 2021, which found that roughly 31 per cent of first time homebuyers in Ontario were receiving gifts for down payments.
The bank says that the average gift received by first time homebuyers in Ontario is now up to $128,000 and trails only British Columbia, where the average first time homebuyer gift amount is $204,000.
The Ontario number has risen by 52 per cent over the last five years, according to the bank.
In B.C., the number has surged by 90 per cent.
“Importantly, this phenomenon is helping to mitigate the bite of housing inflation for buyers, but unfortunately it is also contributing to a widening of the already wide wealth gap in Canada,” the report states.
The average price of a Toronto home was $1,165,691 in May, which actually represented a 2.5 per cent decline from this time last year.
However, higher interest rates have pushed up the cost of borrowing and have deteriorated affordability.
The CIBC report notes that “homebuyers relying on a wealth transfer from their parents in order to purchase a home is becoming the norm,” especially in the country’s most expensive real estate markets.
It also suggests that the phenomenon could be translating into higher prices.
“It’s no surprise that gift amounts have a strong correlation with home prices, although gifts have continued to increase despite the drop in home prices seen since 2021,” the report states. “While the benchmark home price has fallen by 14 per cent since its COVID-era peak, prices are still 33 per cent above pre-COVID levels and that means that gifts have risen faster than home prices over that period.”