One-third of Canadian baby-boomers – and more in Metro Vancouver – plan to give ‘living inheritances’ to their adult children specifically to help them buy real estate, a new survey has found.
Sotheby’s International Realty Canada’s latest Generational Trends Report analyzes a Mustel Group survey of more than 2,000 Canadians aged 52 to 71 carried out in October 2017, and says that this group – which makes up more than 30 per cent of the population – is highly influential on the real estate market.
Brad Henderson, president and CEO of Sotheby’s International Realty Canada, said, “Baby boomers affect the Canadian real estate market on multiple levels: as direct consumers who drive housing demand and product mix, as arbiters of market confidence, and as indirect influencers through their financial support of next generation home buyers. Anecdotally, we have known that funds from the ‘Bank of Mom and Dad’ have been flowing into the market – this new report sheds light onto some of the critical details.”
It found that one-third of boomers plan to transfer wealth – within their own lifetimes – to their beneficiaries (mostly their adult children) with the specific purpose of helping them buy real estate. This proportion increases to 36 per cent in the Vancouver region. The median age of recipients of these “living inheritances” is 30 to 34 at the time of receiving the gift.
In addition, a similar proportion of boomers plan to bequeath money for real estate purchases in their wills – meaning the adult children of two-thirds of baby-boomers can expect to receive a lump sum at some point.
The median amount gifted for real estate purchases is between $25,000 to $49,999 in the Vancouver, Calgary and Toronto metropolitan areas. Broken down by boomers’ household incomes, the median amount given by those with incomes under $100,000 is around $25,000, with 72 per cent of gifts coming in under $50,000, whereas only 53 per cent of gifts from those with incomes over $100,000 were for less $50,000. A surprising 20 per cent of those high-earners gave between $100,000 and $500,000.
The Sotheby’s report said that that “this transfer of wealth is opening doors to homes and borrowing options otherwise unavailable to many recipients.” Across Canada, 44 per cent of boomers who have given, or intend to give, a living inheritance said they believe that their recipients would not have been, or will not be, able to buy a home without that gift.
Sotheby’s also asked boomers about the performance of their real estate assets compared with other investments. Unsurprisingly, 61 per cent of respondents – and 72 per cent of Vancouver-area respondents – said that their real estate assets had outperformed other investments.
Three-quarters of Canadian boomers said they recommend that the next generation of prospective home buyers purchase real estate in their city. Interestingly, this drops to a still-high 66 per cent among Vancouver respondents, perhaps due to higher fears of a local market correction.