Baby boomers who know the struggle is real for the younger generation trying to buy property are sharing some of their wealth.
But when parents pay their kids’ down payments, they’re transferring income inequality along with their wealth, according to a new report.
A survey by real estate agency Sotheby’s and research firm Mustel Group found that one-third of baby boomers in four of Canada’s major metropolitan areas — Toronto, Vancouver, Calgary, and Montreal — have given or plan to give a “living inheritance” to relatives to help them buy real estate.
And those who make six figures or more are almost twice as likely to help — 27 per cent compared to 49 per cent.
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Sotheby’s CEO Brad Henderson said the survey helped specify that richer Canadians are able to transfer more money to their children, and that their children want to buy a home with that money.
“To that extent that you think is perpetuating income inequality then yes, we certainly think the results support that view,” he told HuffPost Canada.
The survey showed household income also affects the price of homes purchased with that financial windfall.
Nineteen per cent of beneficiaries of baby boomers with household incomes over $100,000 purchased homes in the $500,000 to $750,000 range, and 10 per cent purchased homes over $750,000. That compares to rates of 12 per cent and 9 per cent for recipients of less affluent baby boomers, respectively.
Household income also affects how early you’ll receive money from the Bank of Mom and Dad. Some 83 per cent of recipients from baby boomers with household incomes over $100,000 were under age 35, compared to 70 per cent of those with household incomes below six figures.
Henderson said the majority of parents are making sure that the money they pass down to their kids comes with a catch.
“I think that also they’re looking at it from the perspective that if they help their children to buy a home that down the road, it will be a much more powerful inheritance than waiting until they pass away and transferring that money and not having them invested in that,” Henderson said.
Everything that the baby boomers have done has had an impact because they’re, to use a crude expression, the pig in the python.Brad Henderson, Sotheby’s CEO
It’s no surprise that parents want to help their kids buy property, since …read more