The importance of parental help for assembling the down payment by first-time buyers: a look at young families in Canada

The Canadian housing market has undergone significant transformations in recent years, making home ownership particularly difficult for young families. In this context, financial help from parents has become a determining factor in accumulating the down payment needed to purchase a first home.

The Canadian housing market: a complex reality for young families

According to Statistics Canada data, in 2023 the median renter family under 35 owned $12,000 in liquid assets. By contrast, the median under-35 homeowner owned a principal residence with a median market value of $460,000, in addition to $37,000 in liquid assets. Even by cashing out all of their financial assets, young renting families still found themselves nearly $80,000 below the 20% down payment threshold required to buy a property. This disparity highlights the major barriers these families face to home ownership without external support.

The impact of parental help: essential support

Facing these challenges, more and more young Canadians are turning to their parents for financial help. A CIBC report revealed that in 2021, nearly 30% of first-time homebuyers received a financial gift from their parents, compared with 20% in 2015. This trend underscores the growing importance of family support in the home-buying process for young families.

Government measures to facilitate housing affordability

Acknowledging these challenges, the Canadian government has implemented several initiatives to help Canadians save for a first property. The Tax-Free Savings Account for the purchase of a first home allows Canadians to contribute up to $8,000 per year, up to a cumulative amount of $40,000, toward their first down payment. Since April 1, 2023, more than 300,000 Canadians have opened such an account, thereby facilitating saving for a property purchase.

Practical advice for young families seeking to own a home

• Establish a realistic budget: Analyze your income and expenses to determine how much you can save each month toward your down payment.
• Take advantage of government programs: Learn about initiatives such as the Tax-Free Savings Account for the purchase of a first property and the Home Buyers' Plan (HBP) to maximize your savings.
• Consider family help: If possible, explore the possibility of financial support from your parents or other family members to increase your down payment.
• Avoid unnecessary debt: Reduce existing debts and avoid taking on new ones to improve your borrowing capacity and debt-to-income ratio.
• Consult a mortgage broker: A professional can guide you through available financing options and help you find the best solution suited to your situation.

Sources

• Statistics Canada - Family support in entering the Canadian housing market
• Statistics Canada - Intergenerational housing outcomes in Canada
• Government of Canada - Canada’s economic plan helps Canadians save for the purchase of a first property
• Government of Canada - Canadians can save for their first property thanks to the new Tax-Free Savings Account for the purchase of a first property
• Government of Canada - Helping more people buy a property