It’s often referred to as the Bank of Mom and Dad — and last year, it’s where more B.C. first-time home buyers turned to for financial support in trying to break into the housing market.
That’s according to anecdotal information from the B.C. Notaries Association, a group of legal advisors commissioned by the Supreme Court of British Columbia that are trained in areas of law such as land law, wills, and powers of attorney, among others.
There are actually fewer first-time home buyers overall in the province. In the Association’s 2018 real estate report, 53% of notaries said they saw a decrease in first-time home buyers last year.
But 83% of notaries said that most of their first-time home buyer clients were getting help from parents. Only 8% were buying a home on their own.
In 2015, only 57% of notaries said that first-time buyer clients were typically getting help from Mom and Dad.
First-time homebuyers are also getting more money from their parents — about 42% of notaries said that parents provided their kids with 25 to 50% of the down payment. That’s a 10 percentage point jump from 2015, when only 32% of notaries said that parents were providing first-timers with a quarter to half of their down payment amount.
Why are more first-time home buyers turning to their parents for financial help? A few reasons.
The survey asked notaries if home prices in their local communities were a problem, and 76% said “Yes.” The contributing factors most often selected were “Increased mortgage restrictions,” “rising interest rates,” and “lack of supply.”
Vancouver home prices continue to skyrocket, and last year, the city’s vacancy rate remained below 1%. The Bank of Canada has raised its key lending rate five times in the last year-and-a-half, which affects the interest rates on variable-rate mortgages. And in January 2018, the Office of the Superintendent of Financial Institutions (OSFI) introduced a new mortgage stress test that has made it significantly more challenging for wannabe homeowners to qualify for a mortgage. In fact, the stress test has made it so that another $36,000 in household income is needed in order to buy a home at Vancouver’s average home price of $1.1 million.
It’s no wonder first-time buyers are asking for help. Not only is the process, for many, unaffordable. It requires a lot of research, too.
Last year, home sales in the Vancouver area region nosedived to their lowest annual level since 2000, according to data from the Real Estate Board of Greater Vancouver. And the total number of homes sold in Metro Vancouver last year fell to 24,619. That's down 32% from nearly 35,993 sales that were recorded in 2017. It’s also 25% below the region’s 10-year average.