Baby boomers buy into luxury, not less space
→ Would you be surprised by the results of a recent Sotheby’s study that shows baby boomers are the real driver behind the luxury real estate market in Canada? For the last two decades financial planners and demographic watchers have predicted that the baby boomer generation is going to downsize— but this trend just never came to fruition.
Instead, baby boomers have been investing in luxury homes and condos, while helping their Gen-Y offspring with home purchases. According to the Sotheby International Realty Canada study, nearly a third of first-time Gen-Y homebuyers got some sort of money help from their baby boomer parents, despite their parents’ desire to either hold on to the family home or to resize to a smaller, but more luxurious home.
How many first-time buyers purchase a detached home?
→ Another study from Canada’s second-biggest mortgage insurer, Genworth, offered a glimpse into the “typical first-time homebuyer” currently in the market. According to the study, more than half of first-time buyers purchase a conventional, fully-detached home. However, buyers in the hot markets, such as Toronto and Vancouver (and in condo-booming Montreal) the percentage of first-time buyers who bought a single family detached home dropped to less than 30%.
Bank of mom and dad
→ The Genworth study also showed that the typical first-time buyer paid about $293,000 for their first property. The average down payment was 12% (or $34,000) — and almost a third of buyers got this money from a family member.
Thankfully, 22% of buyers got a straight cash gift, while another 9% were given cash loans from the bank of mom and dad. Another 5% used the proceeds from wedding gifts to help buy a house, while 1% of buyers admitted using an inheritance for a down payment.
The number of buyers to hit up their parents for down payment help was greatest in the two hottest markets — Vancouver and Toronto — with 40% and 35% of buyers (respectively) withdrawing funds from the bank of mom and dad.
Single or not
→ According to that Genworth study, 66% of buyers bought a house with their life partner, while 33% made the purchase on their own. But regardless of whether or not you bought with someone or not, the average household earnings for these first-time buyers was at least $100,000 per year.
More debt or not
→ Of those that did buy their first home only 57% did not take on more debt since getting a mortgage. However, 13% of first-time homeowners admitted having to borrow more money to pay for unanticipated repair costs on the home.