More First Time Buyers Receiving Down Payments From
Mom and Dad in 2016
BC Notaries 2016 Year-End Real Estate Report
Vancouver, BC - A December survey of BC Notaries across the province found that more first-time buyers are benefiting from financial support from their parents in amassing down payments on their first home purchase than in previous years, and those down payment percentages were often higher since new federal lending regulations were introduced in October.
"It's great to see that many first-time buyers are finding ways to get their first home, despite rising prices," said Tammy Morin Nakashima, a Notary in Richmond and President of The Society of Notaries Public of BC.
"Regardless of the market or regulatory conditions, the most important consideration is that young buyers understand all of the short and long-term costs that may apply to buying and owning a home. These factors need to be considered when you're deciding what you can afford and how to structure the purchase. Notaries work closely with realtors, mortgage brokers and others to help explain these considerations."
Notaries provide conveyancing or other legal services on more than half of all residential real estate transactions in B.C. and are highly trained and experienced in both simple and complex real estate transactions. Many Notary offices handle hundreds of transactions for buyers and sellers each year.
First-Time Buyer Activity Steady or Improved
The 150-participant survey also found that first-time buyer activity remained strong over 2016. BC-wide, 55% of Notaries noted that first-time buyer activity stayed the same in 2016, 29% noted an increase, while 16% cited a decrease. (Graph 1, below)
Even in markets that experienced rapid house price increases, Notaries cited similar or increased activity in 2016 vs. previous years. (Graphs 2 through 4)
Down Payment Help from Mom and Dad
Province-wide, Notaries reported that more of their clients are getting help from parents to come up with enough money for their first down payment than in previous years.
In 2015, 57% of BC Notaries reported that first-time buyer clients were typically getting help; 24% reported clients paid the down payment on their own.
In 2016, 72% said first-timers were typically getting help with their down payment and 15% were buying on their own. (See Graph 7, above)
Regionally, 71% said clients were typically getting help in Greater Vancouver; 84% in the Fraser Valley; 75% in the Kootenay region; 67% in Kamloops Okanagan which was the only area which showed a decline; 100% in the Sea-to-Sky/Sunshine Coast; 70% on Vancouver Island and only 37% in Northern BC. (Graphs 8 through 14).
Most Down Payment Funds are Given as Gifts
Of particular note from a life planning perspective, many parents are providing their first-time buyer children with some level of financial support as an outright gift, without going on title themselves.
Province-wide, 78% of Notaries said their first-time buyer clients received funds from Mom and Dad as a Ôgift' with no ownership in exchange for the funds provided. (Graph 15, below)
Also importantly, in many cases, the financial gifts represent a significant percentage of the total down payment with 85% of Notaries citing their clients get help with anywhere up to 50% of their down payment (49% get help with up to a quarter of their down payment and 36% receive 25% and 50% of the funds needed to secure their first home). (See graph 16)
"Many parents who can afford to provide financial support to their children for buying a first home are doing so. They see it as an important step for their adult children, and this kind of parental support is increasing as house prices increase," said local Notary.
"It's important, though, that people consider the implications of an outright gift versus going on title, particularly in the event of a marriage breakdown, financial disruption such as a potential job loss or severe health event, or even an earlier-than-anticipated sale of the home. Notaries can advise our clients on all of these factors and help them decide what's best for their family and their long-term goals and interests."
Higher Down Payments Avoid New High-Ratio Mortgage Hurdles
The survey asked Notaries if their first-time buyer clients were increasing their down payments to meet the new CMHC 20% Ôstress test' threshold introduced in October 2016, related to mortgage insurance. About two-thirds said Ôyes'. (Graph 17)
About BC Notaries:
The Society of Notaries Public of BC represents more than 365 highly-trained legal professionals. Most Notaries have locally owned and operated offices and all provide personal assistance to clients across the province. Individuals, families and businesses seek the services of BC Notaries for a wide range of non-contentious legal matters, including residential and commercial real estate transfers, mortgage refinancing, Wills and advanced healthcare planning, powers of attorney, and other important documents.
The Notary's Tradition of Trust spans 2000 years. Notaries first came to British Columbia over 100 years ago. They continue to serve their valued clients and their communities across the province. For more information, please visit www.notaries.bc.ca.