Thinking of gifting a down payment? Here’s what you need to know

The share of first-time homebuyers that received financial help from family members is currently 31%, up substantially from 20% in 2015. Given the surge in home prices during the pandemic, it’s not surprising that gift amounts have risen sharply. Gifts in that group are sitting 73% above 2019 levels, with the average gift now at approximately $115,000.

For younger family members choosing to upsize their homes, 12% are relying on gifted funds from close family members. Gifts in that segment are higher than their first-time homebuyer counterparts, with the average gift amount at approximately $167,000. This is in line with the fact that they are presumably purchasing bigger properties and therefore more expensive homes.

It’s no surprise that gift amounts have a strong correlation with home prices. However, gifts continue to increase despite the drop in home prices seen since 2021. While the benchmark home price is down by 14% since its COVID-era peak, prices are still 33% above pre-COVID levels. The increase in down payment gift amounts has likely been facilitated by parents downsizing and reaping the benefits of high home prices upon selling their principal residence.

Ontario and British Columbia, Canada’s most stretched provinces in terms of affordability, have seen a higher reliance on gifts for first-time home purchases, with 36% of that segment receiving gifts — a full 5%-points above the national average. The gift size is substantially bigger in BC, where home prices are higher, with the average first-time homebuyer gift amounting to $204,000. In Ontario, that figure sits at $128,000. 

If you’re considering gifting a down payment or would like to learn more about ways to help the next generation secure a home purchase, professional advice is a great way to get started. A wealth management advisor can help you fit gifting funds to the next generation for a down payment into your greater wealth plan. They can also connect you with a tax specialist to discuss the tax benefits of gifting money. Younger family members can also benefit from professional advice to help them plan for their future financial goals alongside their new home purchase. 

At CIBC Private Wealth, we take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss these insights in more detail or have questions about your investment portfolio, get in touch with your advisor anytime or find an advisor in your area.