Who Are The Homebuyers in Canada: Millennials or their Parents?
If you are a millennial (you are born between 1981 and 1998), there is no doubt that your social media feeds are exploding with photos of your newlywed (or newly pregnant) friends purchasing their first home. With grins on their faces and keys in their hands, these photos can send an onslaught of emotions to any social passerby. With a real estate market that has skyrocketed, especially in Toronto and Vancouver, are you left wondering how they pulled it off? Well, a recent study concludes that they certainly did not do it alone.
You might be surprised to learn that a recent global study conducted by HSBC concluded that almost every two in five millennials who currently own a home in Canada had ample financial support from their parents to make that first dream home fantasy a possibility. A similar study completed by the Bank of Montreal last year concluded that 44% of millennials wholeheartedly expect parents to help them financially for the purchase of their first home. [1]
Today’s Reality
- Internationally, 36% of millennial homeowners were financially supported by their parents.
- In Canada, 37% of millennial homeowners were financially supported by their parents.
- In the UAE, 50% of millennial homeowners were financially supported by their parents.
- One in every five millennials have moved home with their parents to save for a downpayment on a new home.
According to Mr. Nugent, CIO of Wealthsimple, “too often, you see parents dipping into their own [credit]. Then you’re going leverage on leverage; that’s a bit scary”. These parental handouts run the risk of preventing millennials from learning effective financial management and budget planning both now and as future homeowners. From a social perspective, the high rate of parental contribution and the lack of transparency around it creates a false reality where those without parental support will feel left out of the real estate market for good and lesser than their more fortunate home buying friends.
That is not to say there are no benefits to these parental contributions. Considering that the current real estate market is hauntingly inaccessible for most millennials, we risk an entire generation without assets. The boost from mom and dad may help to sustain the real estate market and protect future generations.
The next time you see that envy-inducing social media post about your co-worker with keys to a downtown home, remember this: 64% of millennials who are eager to purchase a home have neither the budget nor the salary in place to do so and 37% of them are supported by their parents. We encourage future homebuyers to set a realistic budget and open a savings account if home ownership is their dream.
For more information on home ownership in Ottawa, contact our team of expert Realtors® today.
[1] http://www.theglobeandmail.com/globe-investor/personal-finance/genymoney/millennials-are-buying-homes-but-many-have-parental-help-survey-finds/article34157168/
