VANCOUVER — For James and Eilona Penner, a little bit of help from family meant the difference between buying their first home in Maple Ridge this spring or waiting three years, as they had planned.
That intergenerational transfer of wealth is becoming a bigger factor for young buyers trying to get on Metro Vancouver’s steep property ladder, according to BMO’s annual survey of first-time homeowners.
The survey found that four in 10 respondents in Metro Vancouver were expecting help from parents or other relatives to make their purchase.
And Metro Vancouverites are waiting longer, paying more — an average of $506,000 compared with the national average of $316,100 for a first buy — and willing to cut back on lifestyle purchases to take that first step, the survey found.
For the Penners, it meant Eilona’s mother contributed to the down payment so her daughter and son-in-law could buy for $360,000 the 1,500-square-foot house they had been renting, and is living with them until circumstances allow the couple to pay her back.
“We wouldn’t have bought without her,” James Penner said of their arrangement. “And (without) her allowing us to step into it, we … most likely would have started with a townhouse.”
Instead, they will take possession of a house in mid-May that has room for their young family, children aged two and four.
The arrangement is something Penner has discovered is quite common among his co-workers at CP Rail. He said one colleague is buying into a property in Mission, along with his in-laws, that has two houses on it, and another is buying his in-laws’ house, which the mother-in-law will continue living in — an arrangement similar to his own.
And whether it is parents helping children make a down payment with a gift of cash, or buying in under some other arrangement, it is something that realtors are seeing more of in Metro Vancouver’s pricey markets, where buyers are having a harder time qualifying for mortgages under rules that have been tightened up by the federal government over the last two years.
“Families getting involved as a result of kids not being able to pull (a purchase) off on their own, there’s much more of that,” said Ron Antalek, managing broker for Ron Antalek Re/Max Lifestyles Realty in Maple Ridge.
Antalek doesn’t see the same level of parental help in his more starter-friendly market of Maple Ridge/Pitt Meadows that was found in the BMO survey.
However, the one-quarter to one-third of purchases he sees that involve family participation is a big increase from just a few years ago.
“Then it was maybe one in 10,” he said.
For Metro Vancouver as a whole, BMO’s Chris Menard said, there was a substantial jump in expectations of parental help in the 2014 survey. In last year’s edition, he said, it was 33 per cent.
“It’s interesting to show that kind of intergenerational switch of wealth, if you will,” he said, which is understandable in the region’s high-priced markets.
In the survey, BMO found that 57 per cent of Metro Vancouver respondents said they had delayed making a first purchase because of rising prices, and some 66 per cent reported sacrificing lifestyle choices to help add to savings for a down payment.
Antalek said he has witnessed some of that. He has seen first-time buyers lose deals because their non-mortgage debt was too high for them to qualify for a mortgage.
Then it takes cutting up a credit card or giving up a car lease to bring their debt picture back into an acceptable ratio for their banks, he said.
“Restructuring is what gets people who couldn’t do it six months ago making it happen now,” Antalek said.
Helping children boost their down payments above the 20-per-cent threshold for the requirement of mortgage insurance is another motivating factor for parents to get involved, according to Bill Binnie, managing broker for Royal LePage Northshore in West Vancouver.
The BMO survey found that the average down payment that Metro first-time buyers expected to make was 21 per cent, the highest in Canada.
“That tells me a lot of people are topping up to 20 per cent, and I know anecdotally that it is help getting it up to 20 per cent,” Binnie said.
Antalek said he is seeing less speculation. Buyers are purchasing because they believe in home ownership, not for the opportunity to flip their purchase, which used to happen more often.
BMO commissioned the firm Pollara to conduct the survey, which used a random sample of first-time home buyers contacted between Jan. 24 and March 6 of this year. The survey is accurate to plus or minus 4.3 percentage points, 19 times out of 20.
Some details from the report, based on the experiences of the first-time buyers surveyed:
In Vancouver
Average price of first-time home: $506,500
Down payment percentage: 20.9%*
Percentage who set a budget, but are willing to break it for the right house: 41%
Expecting parents or relatives to help with their purchase: 40%
Those who say their first-home purchase was delayed by rising costs: 57%*
Percentage who made cutbacks to lifestyle to afford a home: 66%
*highest in Canada
In B.C.
Average price of first-time home: $430,300
Down payment percentage: 19.3*
Percentage who set a budget, but are willing to break it for the right house: 46%
Expecting parents or relatives to help with their purchase: 32%
Those who say their first-home purchase was delayed by rising costs: 45%*
Percentage who made cutbacks to lifestyle to afford a home: 58%
*highest of any province
Average first-home purchase price by region:
B.C. $430,300
Alberta $364,700
Ontario $358,400
National average $316,100
Quebec $222,300
Man/Sask $226,100
Atlantic $204,400
Average first-time purchase price by major city:
Vancouver $506,500
Toronto $408,300
Calgary $363,400
National average $316,100
Montreal $237,900
Average first-time home price, by province:
B.C. $611,688
Ontario $423,691
Alberta $407,540
Nfld $308,851
Sask $293,192
Quebec $263,661
Manitoba $257,016
Nova Scotia $218,261
P.E.I. $164,176
N.B. $159,201
Source: BMO 2014 First-Time Home Buyers Report
