CIBC estimates that Canadian parents gifted over $10 billion to help their children buy homes during the past year.
Bank economist Benjamin Tal wrote that this financial assistance accounted for 10 percent of total down payments.
“By province, the most expensive provinces naturally see the largest share of gifting,” Tal stated in a report Monday (October 25).
In Vancouver, the gift from mom and dad in the first quarter of 2021 averaged $180,000 for first-time homebuyers.
The gift is even larger for mover-uppers or those moving to bigger properties.
In the first quarter of 2021, these Vancouver buyers got an average of $340,000.
These amounts are greater than in Toronto, where first-time homebuyers and mover-uppers got more than $130,000 and almost $200,000, respectively.
So what does this do to the wealth gap in Canada?
“As for the impact of wealth inequality, clearly gifting acts to narrow somewhat the wealth gap between gifting and non-gifting parents,” Tal wrote.
“At the same time however,” the CIBC economist continued, “gifting clearly works to widen the wealth gap between receivers and non-receivers.”
Why is that?
“That increase in the gap is much larger than the actual gift size as it might make the difference between owning and not owning a house, with receivers potentially benefiting from future home price appreciation,” Tal wrote.