More First-Time Buyers Getting Down Payment Help from Mom and Dad
Affordability a Continuing Issue in Most Regions
A December survey of 193 BC Notaries across the province found that most Notaries saw the same or decreased level of first-time buyers in 2019 despite a softened market, particularly during the beginning of the year. Notaries also indicated that first-time buyers who were making a home purchase were much more likely to lean on parents for financial support to meet down payment requirements than in previous years with 90% saying most first-time buyer clients got help in 2019 compared to 70% in 2015 (see chart p2).
Notary participants also cited anecdotally that they are seeing increasing activity and more purchases in the second half of 2019 following a quieter market in 2018 and early 2019.
BC Notaries are responsible for the conveyancing or other legal services in more than half of all residential real estate transactions in the province, and often find themselves helping first-time homebuyers understand the process.
“Buying a home in any market involves both short and long-term costs that homebuyers need to carefully consider and be prepared for,” said Daniel Boisvert, a Notary in Delta and President of BC Notaries Association. “I advise first-time homebuyers to get pre-approved for a mortgage before home shopping and to be prepared for all the additional costs, such as legal fees, property taxes, inspection fees, renovations and moving fees. Also start with a smaller starter home, then trade up when you can.”
Notaries emphasized that it’s also important that first-time buyers, in particular, are aware of the risks of unpaid taxes remaining from the previous owner; as well as vacancy taxes, non-resident taxes and possible speculation taxes which may come into effect if they’re not planning to live in the home full-time.
Mom and Dad Helping First-time Buyers More Often
The survey also found that 90% of Notaries said most of their first-time buyer clients are getting some help, with only 10% buying on their own.
When asked how much of the down payment is coming from parents in 2019, 59% of Notaries said their clients typically get less than 25% of the down payment; a third said their clients typically get 25 to 50% of their down payment, while only 8% got more than half from their parents in 2019.
While more first-time buyers are getting financial help, they appear to be getting a lower proportion of their down payment over the last four years, as shown in the chart above.
“A Notary can create a legal document that protects the interests of the family members involved in the purchase,” said Kristy Martin, a Notary in Langford on Vancouver Island. “It’s important for everyone to consider the implications of providing funds as an outright gift versus going on title. This is particularly important in the event of future separation or divorce, job loss, health issues or other unforeseen circumstances. Notaries can help clients determine what’s best for their family and their long-term goals and interests.”
Increased Mortgage and Housing Supply Key Impacts on Affordability
The survey also asked participants if they thought that home prices were an issue in their local community and province-wide 74% said “Yes”, while 26% said “No”. Only Notaries in Northern BC (at 80%) and the Okanagan (where they split 50/50 on the topic) indicated house prices were not an issue in their community.
Across the province, most Notaries cited issues contributing to affordability issues were increased mortgage restrictions and an overall lack of housing supply.
More regional results follow, below.
Greater Vancouver Results
110 Notaries responded
- Varying experience with first-time buyer activity in Greater Vancouver in 2019, with a majority seeing a decrease or unchanged activity.
- Increase (66% in 2015 to 89% in 2019) in the number of Notaries reporting first-time buyers are receiving help with their down payment
- 85% of Greater Vancouver Notaries report home prices are an issue – the highest in the province —citing increased mortgage regulations, speculation and vacancy tax, and foreign buyers property transfer tax as key factors.
- Many Notaries cited increases in buying and selling activity over the course of 2019.
Fraser Valley Results
10 Notaries responded
- 9/10 Notaries reported their first-time buyer clients are buying strata properties rather than freehold single-family homes traditionally prevalent in this area.
- 8/10 Notaries reported that housing prices are an issue in the region.
- It appears first-time buyers in this region are getting more help with their down payment with most buyers getting more than 25% of their down payment from Mom and Dad.
Northern B.C. Results
10 Notaries responded
- Notaries in Northern B.C. reported an increase (40%) or no change (40%) in first-time buyer activity in 2019 than in other regions.
- Unlike the rest of the province where home prices are a considerable factor, 80% felt this wasn’t a local issue in Northern B.C.
- Notaries in Northern B.C. cited increasing interest in buying in most communities due to resource sector growth
- 6 of 9 Notaries reported that most first-time buyers are getting help with their down payments.
Note –comparative data unavailable for 2015 from Northern B.C.
12 Notaries responded
- Half of participating Notaries reported a decrease in first-time buyer activity
- Consistent reporting of first-time home buyers receiving help from family, most receiving less than 25%
- Divided opinion on whether or not affordability is an issue; with increased mortgage restrictions and lack of housing supply having the most influence on prices and affordability.
Vancouver Island Results
26 Notaries responded
- Most Notaries report a decrease or no change in first-time buyers in 2019
- The only region where all Notaries reported first-time buyers are getting help with their down payment; up from 70% in 2015.
- Many Vancouver Island Notaries (58%) report home prices are an issue in their community, citing increased mortgage restrictions, rising interest rates and lack of supply as the top three factors
About BC Notaries Association:
The BC Notaries Association promotes and supports British Columbia Notaries Public in all communities of the Province and advances the standing of its members and awareness of their services to the public.
BC Notaries are a select group of 400 legal professionals commissioned by the Supreme Court of British Columbia. For nearly 100 years these highly trained legal advisors have provided non-contentious services, including land law, real estate transactions and all the important personal planning tools available to the people of our province: Wills, Powers of Attorney, Representation Agreements and Advance Directives. Throughout history, Notaries have been recognized as individuals of impeccable integrity practicing in a Tradition of Trust. A Notary’s word, signature, and red Notary Seal are time-honoured testaments to the character and skill of these caring professionals.
For more information, please visit www.notaries.bc.ca.
Originally published December 30th, 2019 by bcnotaryassociation.ca
Photo by Aaron Huber on Unsplash