Vancouverites might have something new to groan about when it comes to the housing market saga. Move over foreign investors, young people with rich parents appear to be driving up prices.
A new survey from Real Estate Weekly found that 75 per cent of people in their twenties looking to break into the housing market will need a loan from the “bank of Mom and Dad.” Another one-third said future inheritances will play a role in their first property purchases.
And it’s not just Millennials – 64 per cent of people aged 41 to 50 who want to upsize say they’ll likely turn to family for financial assistance.
“It’s not just young buyers. Condos are relatively affordable compared with single family homes, which have been going up in price at a much, much faster rate than condos, so those people who are trying to upgrade into a single family home are having to get some financial help from family,” REW.ca’s Joannah Connolly told Vancity Buzz.
She said that while this survey had only 400 respondents, it offers a snap shot of possible housing trends in Metro Vancouver.
“There’s so much talk about the foreign buyer. Yes, the foreign buyer is absolutely influencing the luxury home market, which does have a trickle-down effect, but when you’re talking about the type of home the average Joe Vancouverite might buy, that market is definitely influenced by what we’re seeing as a huge amount of generational wealth transfer,” said Connolly.
The result is that young buyers often believe they can afford a higher budget home on a lower income. Over half of young buyers under 30 who did the survey say they make less than $70,000 per year, but had a purchasing budget of $400,000.
Connolly said Baby Boomers – the parents of Millennials – are the wealthiest generation in Canadian history, with huge amounts of equity in their homes that they sometimes use to help their children jump into the market.
She said for those not fortunate enough to have wealthy parents, buying a home in Metro Vancouver might be an uphill battle.
“It does make it really hard for young people without that benefit to break into the property market.”
“This is a market that isn’t slowing down anytime soon. Prices aren’t going to go down – they might rise at a slightly slower rate, but they will continue to rise, so anyone who’s not on this real estate juggernaut of a train will get left behind,” she said.
Around 69 per cent of respondents believe foreign ownership is the main factor driving up housing prices in Vancouver and 60 per cent would like to see limits put in on foreign ownership.
Housing and property prices aren’t the only things contributing to Vancouver’s affordability crisis. The newly launched Canadian Rental Housing Index found that one in four renters in B.C. are spending more than 50 per cent of their income on rent. The index recommends creating more incentives, such as tax breaks, for developers to create purpose-built rental buildings.
To read the full report, click here.