Almost one out of every five first-time homebuyers in Canada got some sort of gift from parents or other family members towards the purchase price, a report from the Canadian Association of Accredited Mortgage Professionals says.
CAAMP is an organization that represents the mortgage industry in Canada, with more than 11,500 members across the country. In a biannual report on Tuesday, the group takes a closer look at some of the numbers underpinning the Canadian housing market.
Between the middle of 2013 and the start of 2015, some 620,000 Canadians bought a home, CAAMP says. First-time buyers are the largest chunk of that, at about 45 per cent, or 280,000 buyers.
As one might expect, the financial details of someone who is buying a home for the first time, and someone later in life who is buying a second or third, can be wildly different.
Across all buyers and types of housing, the average downpayment was $119,000, CAAMP says. That's about one-third of the purchase price of an average home. But first-time buyers, in general, put less down — just over $67,000, on average, or 21 per cent of their purchase price.
Bank of mom and dad
A little under one out of five of them got some sort of financial gift from a parent or other family member, CAAMP says.
All in all, first-time buyers put down $18.8 billion in terms of downpayments last year year. Or that total, $2.2 billion was a gift from parents, and an additional $1.1 billion came as a loan from family.
While not insignificant, both sources of funding pale in comparison to the main source of cash, which CAAMP says is the personal savings of the buyers in question. For first-timers, that made up $10 billion or more than half of the downpayment.
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Still, while it may only be a small amount of the total sticker price, a growing number of first-time buyers are hitting up the bank of mom and dad — as many as 18 per cent, CAAMP says. That's figure is up from as recently as November, when CAAMP said only about 13 per cent of first-time buyers received cash gifts from families for downpayments.
That proportion drops significantly for second- and third-time buyers who have larger pools of savings to draw on, including the proceeds of previous home sales.
If there's one trend across all buyers, however, it's a preference for the prototypical single detached home. Up to 57 per cent of all home sales still come from that increasingly less prominent type of housing stock.
About 60,000 semi-detached and 60,000 rowhouses are sold every year, with the rest of the total, 120,000 or 19 per cent of all sales, taken up by condos.
Most pay less than expected
And despite apocryphal tales of rampant bidding wars, CAAMP says most buyers end up spending less on a home than they had originally allotted to do so. About 75 per cent of all buyers ended up spending less on a home than the maximum they had budgeted for it.
"On average, actual prices paid were 93 per cent of the target maximums," CAAMP said, adding that "outcomes for first-time buyers were very similar to other buyers."
The exceptions, of course, typically come in the two markets that most market watchers frequently single out for skewing the national average higher: Toronto and Vancouver.
CAAMP says "in those two markets, prices are increasing very rapidly, which is causing the national average resale price to increase. This distorted rate of price increase is masking what is more generally a weakened national housing market."
Average mortgage rate: 3%
While many people were choosing to cash out their home equity and "downsize" into a smaller home, CAAMP says that almost two-thirds of second-home buyers ended up paying more than they sold their first home for and were "moving up" the home ladder as opposed to moving down. The average gap was $28,500.
Cheap lending continues to fuel all types of housing activity, with CAAMP calculating that the average Canadian mortgage is currently at three per cent. That's very low by historical standards and clearly a factor in all segments of the market. When CAAMP polled home buyers what they thought was the main factor driving real estate, most said that "too many" people were buying homes solely because of low rates.
But CAAMP's economist Will Dunning points out an implied dichotomy in that: most homebuyers think prices are getting out of control, but everybody seems to think it's because of what other people are doing, not themselves.
"As we have commented in the past, this opinion is hard to square with their own behaviours and their assessments of their own circumstances," Dunning said. "They appear to harshly judge the behaviour of anonymous strangers."