Genworth, in a presentation to real estate professionals gathered for a conference in Toronto on Tuesday, released the results of a recent survey commissioned, looking at some of the characteristics of first-time homebuyers across the country.
The company interviewed 1,800 recent homebuyers between Feb. 5 and March 4. who were age 25 to 40 and had purchased a first home in the previous 24 months.
Coming from the second-biggest mortgage insurer in Canada, the numbers paint a picture of a composite of the typical homebuyer.
More than half of first-time buyers purchased a conventional, fully detached home — although in condo-heavy Toronto, Vancouver and Montreal, that ratio drops to less than 30 per cent.
The bank of mom and dad
The typical first-time buyer in Genworth's research paid about $293,000 for a first property, and put down 12 per cent, or $34,000, up front. Almost a third of them got money from their families to help pad their down payments.
Some 22 per cent were given an outright gift from their families, the numbers suggest, while nine per cent were given cash loans. As well, five per cent used proceeds of wedding gifts to buy a house and one per cent admitted they used the proceeds of an inheritance.
Add it all up, and almost 40 per cent of the homebuyers surveyed by Genworth used some sort of money that they hadn't earned or saved themselves.
Although many real estate watchers have long suspected that down payment money from family is a growing phenomenon, Genworth's numbers are among the most comprehensive attempts to catalogue just how much.
In Vancouver and Toronto, by far Canada's two most expensive cities for real estate, the percentage of those who hit up their parents for all or part of a down payment is as high as 40 and 35 per cent, respectively.
Although at first blush it's another worrisome sign that home prices are too inflated, Genworth president Stewart Levings noted Tuesday that in most cases, that money is coming from parents who can well afford it because they likely fully paid off homes themselves.
"The reality is these gifts are coming from parents with a fair bit of equity built up," Levings told the conference. "So much equity [that it] acts as a buffer, that we don't view that as a higher risk."- DON PITTIS: Why a housing bubble is good (but maybe bad for you)
- ANALYSIS: Face it, Canada's housing market could fall just like oil did
Quite often the money they take out of their own homes to help their kids buy one would have been withdrawn for a vacation or a renovation anyway, so it's not adding to the debt load in any material way, Levings added.
"They're not taking on a lot more debt," said David MacDonald, of Environics Research, who conducted the survey at Genworth's request. "They have a lot more equity at their disposal."
They certainly do. The latest data from the Canadian Real Estate Association (CREA) suggests the average Canadian house price was $431,812 in March, a figure that has risen more than 60 per cent in a little over a decade.
According to Genworth, two-thirds of those surveyed bought a house with their life partners, but the remaining third made the purchase on their own. Fifty-seven per cent of those surveyed said they hadn't taken on any other debt since getting a mortgage, but 13 per cent said they had to borrow more money to pay for unanticipated costs of repairs.
While a plurality of respondents said they had more confidence in their long-term financial health after buying a home, of those surveyed, almost four in 10 (39 per cent) strongly (10 per cent) or somewhat (29 per cent) described themselves as being concerned about making ends meet month to month.
"The survey shows that today's first-time homebuyers have their eyes wide open, their hands firmly on their pocketbook and are thinking hard before assuming the responsibility of homeownership," Levings said.
"This prudence and careful planning should serve Canada's housing market well as responsible first-time buyers grow into responsible long-term owners."