Are Down Payment Gifts Driving Canadian House Prices?

The Rise of Gifted Down Payments

Gifted down payments are becoming increasingly common across Canada. A recent report shows that the amount of financial gifts given to homebuyers has surged by 11% from 2015 to 2024. This trend took off after COVID, coinciding with the sharp rise in property values.

Gifts: A Major Factor in Home Purchases

The average gift amount for first-time homebuyers has reached around $115,000—a whopping 73% increase in just five years. For those moving up the property ladder, the average gift is even higher, at $167,000. However, these figures vary significantly across regions. For instance, in British Columbia, the average gift is over $200,000, while in Ontario, it's around $128,000.

"The gifts are not just helping buyers; they're influencing market dynamics by supporting higher property prices."

A Growing Wealth Gap

The rising trend of large down payment gifts is contributing to the growing divide between those who can afford to buy homes and those who cannot. The fact that these gifts are becoming more common is leading to a widening gap between the "haves" and the "have-nots." In some cases, people are receiving gifts from family members living outside Canada, adding another layer to the conversation.

What Exactly is a Gift?

In this context, a gift is a non-repayable loan typically given by a direct family member, such as a parent or grandparent, to help a loved one purchase a property. Depending on the situation, this gift might need to be documented with a letter from the bank, especially if the money comes from outside Canada.

Impact on the Housing Market

The influx of gifted down payments is undoubtedly impacting the housing market, particularly in areas like Vancouver and Toronto. These gifts enable buyers to purchase properties they otherwise couldn’t afford, pushing property prices higher. However, it's not the only factor driving prices, but it's a significant one.

Final Thoughts

The trend of gifting large sums of money to help with home purchases shows no sign of slowing down. As the wealth transfer continues, the gap between those who can afford to buy homes and those who can't is likely to widen further. If you're in the market for a home, consider how this trend might affect your buying power and long-term financial goals.