High net-worth parents could be fuelling real estate’s dramatic rise: survey

The “Bank of Mom and Dad” offers an average of 145k for a home purchase

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Blame the Bank of Mom and Dad for the lofty prices for real estate.

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A new survey says a massive transfer of wealth is partly fuelling the steady spike in real estate prices, as wealthy parents help their children buy their first homes.

“As housing values in most Canadian cities show little willingness to abate, the support of parents is becoming increasingly important,” the survey by IG Wealth Management and Pollara showed.

Those parents are digging deep to help.

“The average amount of a gift to assist with a home purchase was approximately $145,000,” their study said.

The survey focused on so-called “high net-worth” families — those with a lofty $1 million in investable assets.

That group is estimated to be 913,000 households in Canada, according to IG Wealth Management.

Almost three of four individuals surveyed said they either had acted, or were likely to act to help their children buy their first homes.

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Parental support was highest in British Columbia (33%) and Ontario (30%), the provinces with the most expensive property markets in Canada.

One Vancouver resident who took part in the survey said: “We gave our youngest son $100,000 to buy a house in Vancouver because it’s too damn expensive.”

The average price for a home in Greater Vancouver in October was $1,199,400, according to the Real Estate Board of Greater Vancouver.

The average price for a property in the Greater Toronto Area in October was $1,155,345, according to the Toronto Regional Real Estate Board.

“The Bank of Mom and Dad seems to be playing its part in fuelling the demand for houses,” IG Wealth Management said.

Few of the parents surveyed indicated they would pay the full amount for a home.

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The average contribution from parents was expected to be 25% or less of the total purchase price.

The amounts of property-related gifts increased with the level of wealth or income, as well as the location of the family.

The survey estimates the amount that has been given and will likely be given to adult children in the years to come by affluent Canadian families totals about $100 billion.

Some parents even said they feared that too much support would lead to a lack of appreciation for the effort, determination and prudence necessary to ensure a comfortable and sustainable lifestyle.

“I’ve got a real fear that we’ve spoiled our kids terribly,” one told the pollsters.

slaurie@postmedia.com

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